- The Grand Court of the Cayman Islands has ordered the liquidation of AuBit, Freeway’s parent company, marking the end of the crypto lender
- The court’s decision follows ongoing troubles in the crypto lending sector, impacting over 5,000 retail investors who have pledged $160 million to the platform
- Legal actions and investigations have revealed alleged fraudulent activities, prompting the court to favor liquidation
Crypto lending company Freeway has been shuttered after the Grand Court of the Cayman Islands wound down its parent company, AuBit. The ruling marks the culmination of a plethora of challenges that have beset the cryptocurrency lending platform in recent months, with the court’s decision representing a stark rejection of AuBit’s plea to restructure Freeway rather than proceed with its liquidation. The ruling leaves Freeway’s 5,000 retail investors facing an anxious wait to see how much of the $160 million they invested will come back to them.
High Returns Attractsed Customers
Freeway, formerly known as AuBit Prime, attracted punters through its promise of high yields through its ‘Superchargers’ rewards program, where annual returns of up to 43% were advertised. However, the promise fizzled out in October 2022 when Freeway abruptly halted withdrawals, citing substantial trading losses, right at the same as its contemporaries like Celsius were also experiencing trouble. This move left its 5,000+ retail investors grappling with the inability to access their funds.
The situation escalated investment firm LedgerScore took legal action against AuBit and several affiliated entities in Wyoming in August this year, with the plaintiffs asserting that AuBit was a fraudulent operation propped up by an intricate network of shell companies located in well-known tax havens like the Cayman Islands and the Seychelles.
Furthermore, the lawsuit alleged that AuBit had funneled customer funds to a Greek brokerage, Ardu Prime, reassuring clients that their funds would be kept in segregated accounts.
AuBit Blames Ardu
As the crisis deepened, AuBit began shifting blame to Ardu, claiming that the Greek brokerage was uncooperative with auditors and had failed to release over $60 million of Freeway’s funds. Ardu, in its own legal quagmire, had its trading license suspended by Greek authorities.
In August, AuBit approached the Cayman Islands court, admitting its inability to meet its financial obligations and seeking permission to bring in asset recovery firm Grant Thornton, which oversaw the collapse of Cryptopia, to oversee the restructuring of the company.
This proposal represented AuBit’s hopes of facilitating the recovery of Freeway’s assets while AuBit/Freeway planned to secure additional capital and expand into new business ventures, including an asset tokenization platform and a stablecoin. They contended that asset recovery, restructuring, and revenue generation from new products could independently finance the recovery process.
However, in September, LedgerScore took a different path, urging the Cayman court to appoint independent liquidators for Freeway instead of allowing AuBit to proceed with its restructuring plans, a plea that last week found favor with the judge.
Investigators Will Pick Over Freeway’s Carcas
The court’s decision highlighted the absence of proper and reliable financial accounts that accurately depicted Freeway’s financial situation, and it was evident that the company had not adhered to adequate accounting standards. Consequently, the liquidation route will now pave the way for independent experts to scrutinize Freeway’s remaining assets and ascertain the fate of creditors’ funds.
Meanwhile, AuBit is attempting to distance itself from the Freeway brand, a move contested by LedgerScore, as the battle to recover the $160 million in lost funds enters a new and crucial phase.
