2026-07-31 · Illicit Finance
Islands
They had no contract with the company they petitioned against, and could not afford the undertaking the rules appeared to require. Justice Kawaley let them proceed anyway, and then made the order.
Case file
| Field | Value |
|---|---|
| Matter | In the Matter of Atom Holdings, FSD 54 of 2023 (IKJ) |
| Court | Grand Court of the Cayman Islands, Financial Services Division |
| Judge | The Hon. Justice Kawaley |
| Provisional liquidators | Appointed on an ex parte application; judgment released June 2023 |
| Winding-up order | 7 July 2023 |
| Petitioners | Kalaivani Kandesan, Singaporean; Ulf Parpart-Hergesell, German. Both retail investors in AAX, both proceeding as contingent creditors |
| Company | Atom Holdings Ltd, holding company of the Atom Asset Exchange (AAX) group |
| Grounds for the order | Just and equitable: (i) the need for an investigation, and (ii) loss of substratum |
| Rule at issue | Companies Winding Up Rules, Order 4, Rule 3 (cross-undertaking in damages) |
| Posture as of 31 July 2026 | Wound up |
What the record shows
AAX, the Atom Asset Exchange, was a cryptocurrency exchange group operating through subsidiaries in multiple jurisdictions. Appleby’s note on the case says the group “once boasted two million users”. Other practitioner summaries put the user base at two to three million and cite reported spot trading volumes of US$57.2 billion in July 2022 and US$71.1 billion in September 2022. Those volume figures are the exchange’s own reported numbers and should be read as such.
In November 2022, in the weeks around the collapse of FTX, AAX halted customer withdrawals, describing the outage as “temporary scheduled maintenance”. Employees subsequently alleged the cause was liquidity problems. Users could not reach their money, staff were cut off from company email, Hong Kong regulators disclaimed responsibility, and executives and investors either pleaded ignorance or could not be found.
By the time the Cayman petition was filed, criminal complaints had been made in several jurisdictions, the Hong Kong Police had arrested two company executives, and key personnel appeared to have gone into hiding with whatever remained of the group’s assets.
Two retail investors petitioned to wind up the holding company: Kalaivani Kandesan, a Singaporean, and Ulf Parpart-Hergesell, a German. Neither had a direct contractual relationship with Atom Holdings, because the group conducted its business solely through its subsidiaries. They proceeded as contingent creditors, arguing potential claims for misappropriation of assets, breach of contract, breach of trust, dishonest assistance and knowing receipt. The court accepted their standing, along with their evidence that Atom Holdings was a holding company whose subsidiaries had been used to cause deliberate commercial harm to investors’ interests.
On the standing point, Kawaley J observed at the later hearing that a contingent-creditor petition of this kind “may be uncommon but is not novel”, there being at least one previous similar case.
The cross-undertaking, which is the part that was actually new
The petitioners applied ex parte to appoint provisional liquidators. The court agreed that giving notice to the company would have risked defeating the purpose of the petition.
Order 4, Rule 3 of the Companies Winding Up Rules requires an applicant seeking provisional liquidators to undertake to pay any damage suffered by the company, and the provisional liquidator’s remuneration and expenses, should the petition later be withdrawn or dismissed. Two retail investors could not credibly offer that.
Kawaley J noted that the rule “on its face appears to impose a mandatory requirement for a cross-undertaking in damages to be given by an applicant seeking the appointment of a provisional liquidator”, and that “[w]hether this rule permits the requirement to be dispensed with is a point not seemingly addressed by any considered local authority”. He examined the nature of the rule and found for the petitioners. His stated rationale had three parts: that retail creditors of Cayman-governed companies conducting global business on a mass scale should have effective access to interim relief against corporate fraud and mismanagement; that denying relief for inability to give a cross-undertaking would hinder access to justice; and that the risk of prejudice to the petitioners and to the public interest outweighed the risk of damage to AAX.
Appleby describes this as the first Cayman case to consider the point.
The winding-up hearing
At the 7 July 2023 hearing the former directors instructed counsel to seek an adjournment. Kawaley J refused it, noting that the application came at the very last minute although the former directors had known of the proceedings since at least May 2023, and that it was “almost as if an attempt was being made to create delay without justification”. He distinguished Re MV Cayman Ltd, where an adjournment had been granted, on the basis that AAX’s former directors could articulate no credible reason. He commended the attorney’s efforts while observing that they were “like the charge of the Light Brigade”.
Making the order, he said: “This is a compelling case for a winding-up order. It is a petitioner’s dream, and a company’s nightmare.”
A discrepancy worth recording
Appleby’s own note describes Atom Holdings in two ways that do not sit together. In the background section it calls the group “Hong Kong-headquartered (but Seychelles-registered)”. In the section on the Cayman action it states that “Atom Holdings is a Cayman Islands company”. The Grand Court’s jurisdiction to wind the company up implies the latter for the entity actually before it, and the Seychelles reference most likely attaches to an operating company elsewhere in the group. This article has not resolved it from the judgment.
What I think happened
The gap between those two descriptions of where Atom Holdings was registered is the whole case in miniature. A firm that does this work for a living, writing a considered client note, produced two different answers in the same document about which country the company belonged to. If Appleby’s Cayman partners find the structure hard to state cleanly, a retail user in Singapore had no chance.
Look at what the petitioners actually had to establish. They were customers of AAX. They were not customers of Atom Holdings, because Atom Holdings sold nothing to anyone. It sat at the top of a subsidiary network, and the contractual relationships lived further down. When the group stopped operating, the entity they had a contract with was a subsidiary, and the entity worth pursuing was the parent. Bridging that took a contingent-creditor argument built on five separate causes of action.
The cross-undertaking ruling is the part I find genuinely encouraging, and it is worth being precise about why. A cross-undertaking in damages exists for good reasons: it stops people obtaining drastic interim relief on a whim. But applied mechanically it reserves the provisional liquidation regime for creditors with institutional balance sheets, which in a mass-market retail fraud means reserving it for nobody who was actually harmed. Kawaley J read “shall” as leaving him a discretion. Appleby flags, correctly, that this is a wide reading and that only time will tell whether it produces unintended consequences elsewhere. I think it was the right call on these facts and I also think the caution is warranted.
The thing I would not oversell is the standing point. The judge himself said it was uncommon rather than novel. The precedent that matters here is the cross-undertaking one.
Finally, the timeline. AAX was reporting tens of billions in monthly volume in September 2022 and had halted withdrawals by November, calling it maintenance. A court found nine months later that the company had lost its substratum, meaning there was no longer a business to carry on. That is how fast this goes.
What would have changed the outcome
Know the entity. Not the brand, the entity.
Every platform holding your assets has a legal counterparty behind the interface, and that counterparty has a name, a place of incorporation, and a position in a corporate structure. Those three facts decide what happens if it fails, and they are usually findable in the terms of service in about fifteen minutes.
Before assets move:
- Which legal entity are you contracting with? It is named in the terms of service. If that name differs from the brand on the website, the difference is the point.
- Where is it incorporated? That sets the insolvency regime. Cayman, BVI, Seychelles and Delaware behave differently in a wind-down.
- Is that entity the one holding the assets, or a subsidiary of the one that does? The AAX petitioners had to argue their way up the structure, and it worked partly because they found a route nobody had used before in Cayman.
- Is anything in the chain regulated by anyone? If not, there is no supervisor to complain to and no resolution regime. There is only a court, and you pay for it.
For holders with meaningful positions the practical answer is to depend on this less: hold assets with a third-party qualified custodian in your own name, and treat trading venues as places you visit rather than places you keep things. DAG coordinates independent custody arrangements on that model, and the entity questions above form part of the counterparty review that goes with it.
The limitation, plainly: this changes which estate your assets end up in. It does nothing about market risk, and it does not help with a venue you have chosen to trade on anyway. It reduces the size of the exposure without removing the need to know who you are dealing with. As DAG’s own disclosure puts it, custody arrangements with third-party independent qualified custodians reduce certain risks but do not eliminate them.
Sources
- In the Matter of Atom Holdings, FSD 54 of 2023 (IKJ), Grand Court of the Cayman Islands, Financial Services Division. Judgment on the appointment of provisional liquidators released June 2023; winding-up order of Kawaley J, 7 July 2023.
- Companies Winding Up Rules (Cayman Islands), Order 4, Rule 3.
- Re MV Cayman Ltd, distinguished on the adjournment application.
- Appleby, “Grand Court takes novel approach in crypto winding up proceedings brought by retail investors”, 13 July 2023, Sebastian Said (Partner, Cayman Islands).
- Baker & Partners, “A Petitioner’s Dream And A Company’s Nightmare: The Compelling Case For The Winding Up Of AAX Crypto Exchange Parent Company, Atom Holdings”, 2023.
- Conventus Law, report on the Grand Court’s approach, 2023.
- Reorg, legal analysis on adjournment of the winding-up petition and the “special reasons” standard.
Related on this desk
- Three Arrows Capital: an offshore liquidation from the inside — the BVI counterpart, and the better-known offshore process.
- QuadrigaCX: the dead man’s keys story is not what happened — the other exchange failure where the assets were smaller than everyone assumed.
Disclosure. Max Avery is affiliated with Digital Ascension Group (DAG). Investment advisory services are offered through DAG Wealth, an SEC-registered investment adviser (CRD No. 328627). Registration does not imply a certain level of skill or training. DAG is not a law firm and does not provide legal or tax advice. Custody arrangements with third-party independent qualified custodians reduce certain risks but do not eliminate them. Nothing here is investment, legal, or tax advice, or a recommendation to buy or sell any asset. This article describes matters of public record.