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The proposed Scheme of Arrangement by Zettai Pte Ltd introduces Recovery Tokens (RTs) to provide Scheme Creditors with the mechanism to benefit from potential future recoveries from, among others, profit sharing, and the recovery of Illiquid Platform Assets under the Scheme.
The First Distribution will be made within 10 business days upon the Scheme being effective utilizing the available Net Liquid Platform Assets (NLPA), and any further Distributions will be made by way of purchases of Recovery Tokens issued to Scheme Creditors.
Here’s a breakdown of why RTs are a game-changer in the Scheme.
What are Recovery Tokens (RTs)?
Under the Scheme, the Creditors will be issued Recovery Tokens on a pro-rata basis. Each Scheme Creditor will be allocated Recovery Tokens based on the proportion of their Approved Claim to the total value of all Approved Claims, ensuring a fair distribution among creditors.
The main purpose of Recovery Tokens is to enable additional recoveries under the Scheme. At the end of a recurring 3-month period commencing from the issue date of the Recovery Tokens, and subject to the net recovery and/or receipt of at least USD10 million of unencumbered assets through, among others, receipt of Illiquid Platform Assets and shared surpluses in accordance with the terms of the Scheme, the Company will determine the appropriate sum to be made available for purchase of RTs. Subsequently, the Company will procure the Token Issuer to offer to purchase the Recovery Tokens from each Recovery Token Holder.
If at the end of such 3-month period, the net unencumbered recovery is less than USD10 million, the amount will be rolled over to the next 3-month period and factored in for consideration in determining the appropriate sum to be made available for the purchase of RTs.
Subject to the fulfillment of legal and regulatory requirements, the Token Issuer may also implement functionality allowing Scheme Creditors to trade Recovery Tokens. Any holder of a Recovery Token (Recovery Token Holder) will be eligible to receive distributions through token purchases as outlined in the Scheme.
Key Highlights of Recovery Tokens
- Potential for Additional Recoveries:
If the Scheme is effective, the First Distribution will be completed within 10 business days of the Effective Scheme Date, with an expected timeline of April/May 2025, subject to the Court’s timelines. Within 60 Business Days of the Effective Scheme Date, the Company will determine the number of Recovery Tokens to be issued to each Scheme Creditor. Issued RTs will be purchased by the Token Issuer using determined recoveries based on the events set out at Clause 7.12 of the Scheme. These include, among others, recoveries of Illiquid Platform Assets and any available shared surpluses from operations on the Platform.
- Pro-rata Issuance:
Scheme Creditors will be issued Recovery Tokens on a pro-rata basis, which will be allocated based on each Scheme Creditor’s share of Approved Claims against the total value of all Approved Claims.
- Trading Functionality:
Subject to the fulfilment of legal and regulatory requirements, the Token Issuer may implement functionality to allow Scheme Creditors to trade Recovery Tokens, and any person who holds a Recovery Token, i.e., a Recovery Token Holder, is entitled to receive Distributions via purchase of Recovery Tokens in accordance with the Scheme.
- Purchase Pricing:
Recovery Token purchase pricing will be set to allow Scheme Creditors to benefit from any market-driven upside (with the Company retaining no upside) subject to the quantum and availability of Net Shared Surpluses and recovered Illiquid Wallet Assets and Stolen Assets.
Allocation of Recovery Tokens
Here’s a simplified example, only for illustrative purposes, to understand how RTs are being allotted:
- As of 18th July ’24, Priya (a Creditor) had a total claim of $10,000 in the WazirX platform.
- $546 million is the Total Claims as of July 18, 2024, 1:00 PM IST.
- A total of 1 billion Recovery Tokens will be distributed among Creditors.
- Claim % Calculation is the formula that calculates how much percentage of the total claim belongs to Priya.
- RT Allocation: (Creditors’ Claim % * Total Recovery Tokens)
This formula calculates how many RTs Priya will be allotted.
- After all the calculations, Priya will be allotted 18,315.0183 RTs.
Distributions and the Purchase of Recovery Tokens
Distributions to Scheme Creditors pursuant to the Scheme will be made available via the First Distribution and subsequently via Recovery Token Purchases at Recovery Token Purchase Milestones.
When a Recovery Token is purchased from a Recovery Token Holder at each Recovery Token Purchase Milestone, the Token Issuer will deposit the proceeds of the Recovery Token purchase into Scheme Creditors’ Platform accounts in stablecoin, cryptocurrency token, or as otherwise directed by the procedures applicable to each specific Recovery Token Purchase Milestone.
Final Thoughts
The Recovery Tokens (RTs) are a unique feature of the Scheme. RTs create a dynamic, transparent solution for Creditors to receive Distributions under the Scheme along with ongoing recovery efforts.
As the Scheme moves forward, RTs will play a crucial role in ensuring that Scheme Creditors are given the opportunity to benefit from the Platform’s recovery journey.
Disclaimer: Cryptocurrency is not a legal tender and is currently unregulated. Kindly ensure that you undertake sufficient risk assessment when trading cryptocurrencies as they are often subject to high price volatility. The information provided in this section doesn't represent any investment advice or WazirX's official position. WazirX reserves the right in its sole discretion to amend or change this blog post at any time and for any reasons without prior notice.
