Trading company Auros, which lost $20M in FTX implosion, is excluded from preliminary liquidation by British Virgin Islands court after major debt restructuring and investments by TradFi trading company Vivienne Court and bitcoin miner Bit Digital.
FTX-Victim Trading Firm Auros Secures $17M Investment
Auros, the crypto trading and market-making company that fell victim to the bankruptcy of crypto exchange FTX, has overcome its liquidity woes, chief investment officer Benjamin Roth said in an interview with CoinDesk. Auros was released from court-supervised temporary liquidation last week following a major debt restructuring and secured a new $17 million investment led by traditional high-frequency trading firm Vivienne Court Trading and bitcoin miner Bit Digital (BTBT).
The turning point comes after months of behind-the-scenes maneuvers to keep the company afloat following the explosion of crypto exchange FTX, which wiped out several crypto companies and caused heavy losses in a number of trading companies. Prior to the FTX crash, Auros was one of the top 10 to 15 market makers in digital assets, processing around 1% to 2% of total cryptocurrency trading volume, according to the company.
Faced with liquidity problems, around $20 million in digital assets are stuck on the now defunct FTX, and Auros missed around $18 million in decentralized finance (DeFi) loan payments. After the company filed for preliminary liquidation in the British Virgin Islands, it spent about five months under court supervision negotiating a way to repay its outstanding debts and liquidate its creditors. Roth said the company is putting his FTX shocks on the back burner.
“We’re the same company that we were pre-FTX,” he said.
FTX Fallout Consequences
As FTX crashed and market participants feared a full-blown cryptocurrency bankruptcy crisis, lenders rushed to collect outstanding loans to mitigate potential losses. As large amounts of funds were tied up in FTX, Auros faced a sudden liquidity crisis in order to pay back all its desperate creditors.
“We were in a position where we didn’t have enough liquid funds to meet all of those open term loans,” Roth said.
Auros management subsequently decided not to repay the lenders and voluntarily applied for preliminary liquidation in the British Virgin Islands (BVI) courts as mediator between the lenders and Auros.
“We weren’t paying immediately because our intention was to pay back everything. We’ve been profitable, so it really was just a matter of buying time to ensure that creditors were all treated fairly and equally,” Roth explained.
BVI assisted in restructuring all outstanding Auros debt and converted outstanding perpetual loans (lines of credit with no maturity) into term loans with maturities. For the roughly $18 million DeFi loan, the company has already paid off 55% of its debt on blockchain-based lending platform Maple, with the rest spread across nine- and three-month loans, CoinDesk informed last month. Roth has refused to disclose details of its restructured debt to centralized lenders, citing contractual obligations.
Auros received a sealed court order from a BVI judge last Wednesday, ending preliminary liquidation proceedings, according to a company spokesperson. Auros is a lean business and has recognized that the crypto market is cyclical, but Roth said he was “laser-focused” on finding additional cost savings in recent months.
The company’s major cost-cutting moves were to reduce its Amazon Web Services costs and rethink data center management. Trading firms need massive cloud computing power to run trading algorithms to keep operational costs down. The firm have also eliminated employee redundancies and laid off some employees. The company currently employs approximately 55 people worldwide.
The Investment
Roth said Auros was ready to raise money even before FTX went bankrupt, and court scrutiny made the fundraising difficult.
“It accelerated the requirement to raise but slowed the process because every decision had to go through the provisional liquidators,” Roth said.
Vivienne Court’s investment means that traditional Australian trading company will be exposed to digital asset trading. Nasdaq-listed BitDigital, the second largest investor, is a client and strategic partner of Auros’ expanding new derivatives solutions business to provide yields and guarantees to its customers. For miners managing large amounts of cash and digital assets such as BitDigital and Bitcoin (BTC) and Ether (ETH), Auros is a great way to generate high returns from holdings by hedging futures production and creating options structures.
“The team’s deep derivatives background and expertise across technology and finance also bring the necessary capabilities to cater to our growing business needs,” Samir Tabar, Bit Digital’s chief strategy officer, said in a statement
Other investors in this round include asset manager and blockchain technology developer Trovio, venture capital firm Primal Capital, trading firm Epoch Capital, and a group of veteran and former traders from private trading and market-making firm Optiver. Marcel Klooss and Bit Digital co-founder Hughes Ching will join the Auros Board of Directors. The capital increase of Auros came as investments in the crypto business had largely evaporated after a year-long bear market. The investment round was important as Roth anticipates consolidation in the crypto industry this year.
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