Freeway users rightly expect more information and frequent communications on our journey to recovery and beyond.
We hope with this update that you gain a better understanding of what the team has been working on and working against.
We also hope that this update marks a return to the style of consistent, transparent communication Freeway was known for prior to the events of October 2022.
To get to the bottom of this matter, on Wednesday 23rd August 2023, our legal team filed a petition to the Grand Court of the Cayman Islands which we will explain shortly.
But first…
What Happened In October 2022?
In the immediate aftermath of October’s reported loss, Freeway engaged an independent, experienced FX algorithmic expert and risk analyst to undertake a forensic analysis of AuBit International’s trading accounts held with Ardu Prime brokerage as stated in paragraph 38 of the court petition.
“In order to ascertain (i) the exact causes and quantum of the significant losses incurred in the Ardu Prime accounts on 13 October 2022 (ii) the performance of the FX Algorithm with a view to avoiding any future losses, as well as (iii) to investigate the trading utilising the credit lines, the Company engaged an independent, experienced FX algorithmic expert and risk analyst (“The FX Expert”) in late October 2022. The FX Expert was instructed to undertake a thorough investigation and forensic analysis of all the trading activities of Company’s Ardu Prime brokerage accounts with the intention that the findings of an independent expert report could be shared transparently with all interested parties including the Freeway Community.”
The FX Expert has, however, been unable to complete his analysis as stated in paragraph 40:
“The FX Expert has however, been significantly hindered in completing his investigations and forensic analysis by the inadequately explained delay, alternatively wilful refusal, by Ardu Prime to supply missing trading reports and data concerning the Company’s brokerage accounts, not only in respect to the main trading accounts but in particular those relating to trading backed by cryptocurrency collateral and evidencing any trading with any applicable credit line facility from June 2022 to date. Repeated promises by Ardu Prime’s management to supply such reports and data, and assurances that they would be imminently available have to date, not been fulfilled.”
Paragraph 42 goes on to state that:
“From such trading reports and data as have been provided by Ardu Prime and subjected to close forensic analysis, many material errors and inconsistencies in such reports and data have been detected. Some data contained in reports provided by Ardu Prime appears to have been doctored or “reverse engineered” to conceal losses on the Company’s brokerage accounts going back as far as March 2021.”
Paragraph 43 relates to the data provided to ACA Performance (Europe) Ltd for the creation of a Performance Certification Report for 2021 trading performance:
“Furthermore, it appears that the data relating to the trading performance on the brokerage accounts provided by Ardu Prime to ACA Performance (Europe) Ltd (“ACA”) for the year ending 31 December 2021, so that the latter could undertake an independent audit instructed by the Company and prepare a Performance Certification Report had been altered or otherwise doctored. ACA’s Independent Performance Certificate dated 14 July 2022, showing results of 112.82% growth in the Company’s brokerage accounts, on which the management of the Company reasonably relied in making decisions about its future operations and had reported to the Freeway Community in utmost good faith, may have been predicated on false or inaccurate data supplied by Ardu Prime.”
Regarding the size of the loss, paragraph 44 part (a) states that:
“More than US$60 million in losses reported by Ardu Prime cannot be verified or accounted for in the available trading reports and data.”
And, regarding the credit line and remaining funds, the petition states in paragraph 44 part (d) that:
“The necessity of further credit lines of US$60 million by August 2022, increased to US$130 million on 13 October 2022, before a reduction to US$70 million in December 2022 supposedly required to cover potential margin calls due to volatility in cryptocurrency markets, is also doubtful, and appears to have been a tactic by which Ardu Prime sought (and still seeks) to prevent the Company from removing its assets from the brokerage accounts.”
The above information has led AuBit International to file a petition to the Grand Cayman court to approve the proposed appointment of forensic and asset recovery specialists from Grant Thornton via a voluntary restructuring process.
AuBit International Files Petition At Cayman Islands Grand Court
On Wednesday 23rd August 2023, our legal team filed a petition to the Grand Court of the Cayman Islands to propose the appointment of Grant Thornton Court Restructuring Officers to work to determine the truth, size, and nature of the losses — as well as determine what claims may be brought by AuBit International.
A petition to this effect has been filed and is a matter of public record and you can read the petition for yourself here.
You can also find the petition directly on the Cayman Islands Judicial Administration website as a recent filing here.
Implementing the proposals within the petition is subject to court approval of the petition scheduled for hearing at 10am on 6th September 2023.
As per paragraph 53 the court petition:
“The directors of the Company, together with independent professional advisors retained by the Board, have been significantly hindered in their efforts to develop the terms of a restructuring with its creditors due to the delay, or alternatively, refusal by Ardu Prime to provide missing data, trading reports, executions reconciliation reports and other data in respect of the Company’s brokerage accounts as set out in paragraph 41 above, and to release any of the Company’s assets / monies (amounting to approximately US$60.4 million as at 31 May 2023) held in such accounts.”
The petition requests that two restructuring officers of Grant Thornton Specialist Services (Cayman) Limited be appointed Restructuring Officers of the Company with “Power to Recover all Company Assets,” “Powers to Recover Data, Documentation, and Records,” and “Power to Undertake Forensic Investigation.”
Pending court approval, our purpose in working with Grant Thornton to restructure the AuBit group of companies is to open the best possible route to full recovery by protecting the business, recovering assets, rebuilding revenues with new products and services, and reviewing the possibility of pursuing claims to further assets pending the findings of Grant Thornton’s forensic analysis.
Alongside AuBit International entering a voluntary restructuring process, the petition to the court requests oversight and governance from Grant Thornton Court Restructuring Officers with the duty to care for Freeway stakeholders including Supercharger Simulation holders as noted in paragraph 63 of the petition:
“The Restructuring Officers, acting jointly or severally, and without prejudice to the powers proposed to be retained by the Company’s board of directors (the “Board”) pursuant to paragraph 65 below, shall, unless and until a further order of this Honourable Court is made to the contrary, be authorised to take the following actions, within and outside of the Cayman Islands, without further sanction by this Honourable Court:
a. monitor, oversee and supervise the Board in its management of the Company, and take all necessary steps to develop and implement a restructuring of the Company’s financial indebtedness in consultation with the Board and under the general supervision of this Honourable Court:
i. in a manner designed to allow the Company and the Aubit Group (including Freeway), to continue as a going concern;
ii. with a view to making a compromise or arrangement with the Company’s creditors or any class thereof and any interested parties including Freeway Supercharger holders…”
And the following from paragraph 56:
“The Company is also working with its independent professional advisors and has engaged Appleby, as its legal counsel in the Republic of Seychelles, in order to formulate the potential terms of a restructuring of Freeway, as an affiliate and major creditor of the Company, with the intention of presenting a compromise or arrangement to Freeway’s creditors (or classes thereof) and interested parties such as Supercharger holders FWT holders, pursuant to section 211 of the International Business Companies Act of the Republic of Seychelles or by way of a consensual restructuring.”
It remains our unwavering intention to do everything possible for Freeway and its users and, upon such time as the forensic analysis is complete, we will assess what claims may be brought.
Two Routes To Recovery
Subject to the court granting the petition, it is intended that while Restructuring Officers would work on the recovery of AuBit International’s funds, the Freeway team would focus on raising the capital necessary to fund ongoing operational expenditure.
Freeway will orient its future operations on new products and is currently exploring the creation of new digital products potentially using two new algorithms which have already been identified alongside two new broker/asset manager partners. Due diligence is underway and Freeway has begun discussions with these new potential partners.
The Company may also explore asset tokenisation and a new proposed payments platform using strong industry relationships already in place. Freeway also intends to continue its plans for an innovative new stablecoin. Freeway envisages a mix of new products which will bring revenue from a new, growing user base.
We commit to working with legal teams and relevant regulatory bodies across jurisdictions to bring these products to life in a way that is compliant and with suitable user protections.
We believe that both asset recovery and restructuring and revenue generation from new products are capable of funding recovery separately. Nonetheless, Freeway is not relying wholly on either but both in unison.
Introducing ThriveFi: New Freeway
As part of the proposed restructuring plan Freeway would seek to continue to operate the Freeway brand and platform through a new entity, ThriveFi, a proposed Cayman Islands exempt company.
ThriveFi is proposed to be established on the following basis: 45% ownership to AuBit International as the founder of this new vehicle and with the relevant expertise to develop and market the same, 45% ownership to Freeway Operations Inc for the acquisition of assets including the right to take over the Freeway brand, team, operations and platform, and 10% to be sold to investors to fund operational costs.
ThriveFi is proposed to take over the ownership and operations related to the Freeway brand and through its work will execute the recovery of the Freeway brand, aka “new Freeway.”
Freeway Operations Inc is proposed to be placed through a similar restructuring process in the Seychelles, so that all creditors’ and interested parties’ (including Supercharger Simulation holders’) views may be considered when Freeway Operations Inc’s majority creditor consent is sought for the parallel restructuring of AuBit International.
Freeway Operations Inc will have the ultimate objective of the safe and complete retirement of the Supercharger Simulation program. Freeway Ops Inc will continue to deal with Supercharger Simulation holders and liaise with the restructuring officers when formulating the restructuring plan for AuBit International regarding recovery and potential growth of assets.
Rewards Paused On The Freeway Platform
To prioritise recovery, automatic FWT staking has been paused and all rewards moving forward will be turned off as of 00:01AM UTC 26th August.
The Supercharger swap function has been disabled also.
For the time being, any other changes users would like to make to their accounts on the Freeway platform must be requested via FreshDesk customer support for manual approval.
To make any manual requests, you can access FreshDesk customer support here.
The above information may not apply equally to users in certain jurisdictions. Users in jurisdictions where this does not apply will receive an additional update soon.
You will also shortly see a new holding page on the website and new social media bios as Freeway prepares for a relaunch with new products in the near future.
You can expect a number of regular updates in the coming weeks and months.
Moving Forward
We understand that this has been an extremely difficult time for everyone and may remain difficult while The Restructuring and recovery is ongoing.
Despite present challenges, Freeway’s reason for being remains unchanged: Freeway exists to open access for all to financial opportunity for a better financial future for everyone.
We understand that to build a business around that purpose we must first, with approval from relevant authorities, recover and implement the Supercharger Simulation buyback plan as outlined in the court petition paragraphs 53–56.
Lessons have been learned and Freeway can not and must not, ever, find itself in such a position ever again where its team, customers, and community are affected in such a way.
To that end, we are building new Freeway around core principles of risk management and governance with experienced people and set processes.
We remain dedicated to recovery and we commit to transparency around our progress on this journey as we fight to make this right.
The Freeway Team
The statements in this article relating to future products are subject to change and should not be relied upon when making financial decisions. Any statements by third parties included herein are not necessarily endorsed by nor represent the views of Freeway. You should always seek independent advice before making financial decisions.
