Summary

The appointment of provisional liquidators and subsequent winding-up in CR-2025-000795 Fritz et al v Lykke Corp UK Limited demonstrate the power of insolvency remedies in crypto cases, as well as the benefits of victims acting collectively more generally. This case is believed to be the first winding-up of a cryptocurrency exchange in the United Kingdom.

Background

Lykke Corp UK Limited (“Lykke”) was a cryptocurrency exchange which also offered cold storage solutions. 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. According to Lykke, this amounted to around one-third of the customer assets held on the exchange.

Lykke discontinued trading on 6 December 2024. On 17 December, the (then) sole director of Lykke contacted customers holding certain cryptocurrencies stating that Lykke’s Swiss sole shareholder had decided to file for bankruptcy. Around the same time, his appointment as director of Lykke was terminated.

The insolvency proceedings

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. One of the Creditor Group served a statutory demand on Lykke in January 2025, to which no response was received.

Another creditor petitioned for Lykke’s winding-up in February 2025, on the basis that the company was unable to pay its debts under sections 122(1)(f) & 123 of the Insolvency Act 1986 (the “IA 1986”).

Appointment of provisional liquidators

The Creditor Group, by five representatives, applied urgently for the appointment of joint provisional liquidators of Lykke under section 135 of the IA 1986, to investigate and protect assets prior to the winding-up hearing. That application was heard on an urgent basis in the ICC Interim Applications List the fourth working day after it was made.

Michael Leeds and Jonathan Thielmann of Interpath Advisory were successfully 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.

Winding-up

Chief Insolvency and Companies Court Judge Briggs wound up Lykke in the Winding-Up Court on 26 March 2025. Perhaps unsurprisingly, the petition was taken ‘second time around’.

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. A similar inherent jurisdiction, running alongside section 363 IA 1986, had been recognised in the bankruptcy context in Barker v Baxendale-Walker [2018] EWHC 2518 (Ch).

Lykke had also applied alternatively for permission for the Official Receiver or any other liquidator to appoint the joint provisional liquidators as special managers under section 177 IA 1986; an alternative which in the end was not required.

Comment

Lykke demonstrates the utility of insolvency law in crypto cases, which appears to date to have been relatively under-used. Provided that an English company can be identified which is unable to pay its debts, collective insolvency remedies seem very attractive. In Lykke, the Creditor Group (and other creditors) obtained the benefit of specialist tracing and investigative expertise at limited cost. Chief Insolvency and Companies Court Judge Briggs ordered the costs of both the winding-up petition and the provisional liquidator application to be paid out of the assets of Lykke.

The prior appointment of provisional liquidators also ensured the preservation of highly liquid assets in a ‘hot pursuit’ case. In addition to classic individual tracing claims, Lykke therefore suggests that practitioners would be well-advised also to consider whether collective insolvency remedies could assist their clients. 

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