02/04/2025

Out of Lykke – successful appointment of provisional liquidators and liquidators of UK cryptocurrency exchange

Joshua Folkard, instructed by Jon Felce of CYK, acted for five applicants, representing 85 international creditors of Lykke Corp UK Limited (Lykke), a cryptocurrency exchange holding client assets of approximately US$68 million.

In June 2024, Lykke was allegedly subject to a hack in which US$22.8 million worth of cryptocurrency was said to have been stolen. A group of 85 creditors, assembled by Tobias Schaffner and Niccolò Gozzi of Niedermann Rechtsanwälte based in Zürich (the Creditor Group), sought recovery in respect of crypto- and fiat currency which they were unable to withdraw from Lykke. Another creditor had already petitioned for Lykke’s winding-up.

The Creditor Group, by the five representatives, applied urgently for the appointment of joint provisional liquidators of Lykke under section 135 of the Insolvency Act 1986, to investigate and protect assets prior to the winding-up hearing. Michael Leeds and Jonathan Thielmann of Interpath Advisory were appointed as joint provisional liquidators at a hearing before ICC Judge Mullen on 20 March 2025. The judge accepted that it was right to appoint provisional liquidators under the test in Commissioners for HM Revenue & Customs v Rochdale Drinks Distributors Limited [2011] EWCA Civ 1116; [2013] BCC 419, in particular due to a real risk of Lykke’s assets being dissipated. This was notwithstanding a relatively short period (six days) between that hearing and the listed winding-up hearing.

In the Winding-Up Court on 26 March, Chief Insolvency and Companies Court Judge Briggs wound up Lykke. This is believed to be the first winding-up of a cryptocurrency exchange in the United Kingdom.

The judge also granted the Creditor Group’s application to have Interpath Advisory appointed as liquidators immediately on the winding-up, following the inherent jurisdiction of the court identified in Re W F Fearman Limited (No. 2) [1988] 4 BCC 141, as applied in a ‘hot pursuit’ case such as this, where highly liquid assets need to be preserved.

These orders demonstrate the power of insolvency remedies in crypto and civil fraud cases, as well as the benefits of victims acting collectively more generally. Judge Briggs acceded to the Creditor Group’s request for the costs of their joint provisional liquidator application to be paid out of the assets of Lykke, resulting in a coordinated and cost-effective approach to preserving and commencing investigations into the fate of client assets.

Joshua Folkard was instructed by Jon Felce of CYK, with assistance from Tobias Schaffner and Niccolò Gozzi of Niedermann Rechtsanwälte in Zürich, Switzerland.