March 15, 2021

2nd Circular to Customers / Creditors
Dear Sirs,
Subject: Torque Group Holdings Limited
BVI Company Registration Number: 2024611(In

Provisional

Liquidation)(“Torque”)

I refer to the Circular dated 3 March 2021 (“1st Circular”), in which the Provisional Liquidators notified creditors of
their appointment and provided an update on immediate next steps. A copy of the Court Order is now available
and is enclosed (case number BVIHCOM2021/0031).
Unless otherwise defined herein, capitalised terms used in this circular shall have the same meanings as thosedefined in the 1st Circular.
The purpose of this circular (“2nd Circular”) is to provide customers with an update on progress since our
appointment as Provisional Liquidators of Torque and next steps.
A.

Background
1)

Torque Group Structure

Torque primarily serves as a global online platform for crypto-to-crypto trading and provides users (“Users”) with a
trading platform and other crypto-related services via its websites and mobile applications (“Services”).
Torque accepted deposits from the following cryptocurrencies (i) Bitcoin (“BTC”); (ii) Ether (“ETH”); (iii) Tether(“USD₮”); (iv) Litecoin (“LTC”); (v) Bitcoin Cash ("BCH"); (vi) Tron ("TRX"); and (vii) Ripple ("XRP"). Torque did
not accept deposits in any other cryptocurrency or fiat currency.
Torque is a part of the “Torque Group” which also comprises:•

Torque Management Ltd., a company incorporated in Malta (“Torque Management”), which has no operations,assets or liabilities; and•Torque Technologies Company Ltd., a company incorporated in Vietnam and wholly-owned and solely
directed by Nguyễn Mạnh Hiếu, an independent Vietnamese national (“Torque Technologies”).

BORRELLI WALSH (BVI) LIMITED
3rd Floor, Commerce House
P.O. Box 3339
Road Town, Tortola VG1110
British Virgin Islands

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www.borrelliwalsh.com

For the avoidance of doubt, the appointment of Provisional Liquidators of Torque does not extend to TorqueManagement or Torque Technologies – they are not subsidiaries of Torque.
Torque has a decentralised labour force with its core technology and operations teams working at the direction of
Torque Technologies in Vietnam who are outsourced from a Vietnamese third party.
The Provisional Liquidators have been advised that there are no contracts in place formalising the above
arrangements between Torque and Torque Technologies.
2)

Binance Accounts

Torque primarily uses Binance (www.binance.com) as a cryptocurrency exchange to hold its Crypto Assets in a
network of over 240 Binance sub-accounts (“Sub-Accounts”) linked to a main Binance account (“Main Account”)(collectively, the “Binance Accounts”). Each of these Sub-Accounts were used by Torque for trading the Crypto
Assets to generate profits. Any external withdrawals of the Crypto Assets from the Sub-Accounts need to first betransferred to the Main Account to transact with third parties.
The Provisional Liquidators have identified that the Main Account is not a corporate Binance account, as corporate
accounts were not available on Binance when Torque commenced trading. Instead, the Main Account is anindividual account in the name of an employee held under a nominee arrangement for the benefit of Torque. The
individual nominee has issued a letter to the Provisional Liquidators formally acknowledging the nominee
arrangements and that the associated Crypto Assets are assets of Torque.
B.

Role of Provisional Liquidators/Liquidators

The Provisional Liquidators are officers of the BVI Court appointed to act on behalf of Torque’s creditors. The
provisional liquidation and, ultimately, any liquidation that follows, is a Court process which the BVI Court controls
through its appointed provisional liquidators and liquidators. In addition to their duties to the Court as officers of
the Court, the Provisional Liquidators owe duties to Torque’s creditors. Whilst the Provisional Liquidators will seek
to work with the directors, officers and shareholders of Torque in order to meet their duties to the Court and to
Torque’s creditors, the Provisional Liquidators do not act on behalf of the directors, officers and/or shareholders of
Torque.
Under section 171 of the British Virgin Islands (the “BVI”) Insolvency Act, 2003 (“Act”), a provisional liquidator has
all the rights and powers of a liquidator to the extent necessary to maintain the value of the assets and to carry out
the functions for which he was appointed. The Court may determine the powers of the provisional liquidator if itconsiders fit. The Court has done so in this case to assist the Provisional Liquidators in tracking and tracing
Torque’s assets.
The Provisional Liquidators are bound by obligations set out in the Act and other duties imposed by the Court as
outlined in the Court Order. Section 184 of the Act states that the Provisional Liquidators act as officers of the
Court and are the agent of the company in liquidation – a key obligation is acting independently and in the bestinterests of creditors. This was emphasised during the hearing which resulted in the appointment of the Provisional
Liquidators.
Upon the appointment of the Provisional Liquidators, the power of the directors of Torque have ceased and the
directors no longer have any authority to deal with the assets of Torque. All dealings in Torque and its assets must
now be authorised by one of the Provisional Liquidators or their authorised representatives.
All affairs, business, and property of Torque are now controlled by the Provisional Liquidators for the purpose ofpreserving, protecting and recovering Torque’s assets. Among other things, the responsibilities of the Provisional
Liquidators include identifying, taking control of, protecting, and preserving the assets and business of theCompany and carrying out such investigations as the Provisional Liquidators consider appropriate. As the BVI
Court has ordered, that includes pursuing Torque’s assets in other jurisdictions if the Provisional Liquidators believethat to be a proper course in light of their duties.

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C.

Experience of Borrelli Walsh, a Kroll Business

As of 30 November 2020, Borrelli Walsh is a part of Kroll (formerly known as Duff & Phelps), the world’s premierprovider of services and digital products related to governance, risk and transparency. Kroll works with clients
across diverse sectors in the areas of valuation, expert services, investigations, cyber security, corporate finance,
insolvency, restructuring, legal and business solutions, data analytics and regulatory compliance. It has nearly
5,000 professionals in 30 countries and territories around the world, that are now operating as one team to assist
the Provisional Liquidators in respect of Torque (together, the “Kroll Group”).
The Kroll Group has played key roles in many of the region’s most significant and complex insolvencies, including
most recently the liquidation of Gatecoin Limited, a Hong Kong based cryptocurrency exchange that involved over
100,000 investors and HKD302.6 million (USD39 million) of cryptocurrency claims. Set out below is a high-levelsnapshot of Kroll Group’s relevant expertise:•

Insolvency and restructuring – Kroll Group is a market leading insolvency and restructuring firm specialisingin complex and cross border assignments in Asia and the Caribbean. The expert team has extensive forensic
accounting experience and apply this rigorous approach to their liquidation investigations, including
establishing fund flows and asset tracing. With the benefit of these forensic investigations, we have a trackrecord of successfully proving accounting frauds, securing assets internationally and recovering funds as
Liquidators from legal claims against directors, auditors and shareholders, including through litigation and/or
settlement negotiations, for the benefit of its creditors.

•

Investigations and business intelligence - Kroll Group is internationally recognised as the premier firm in
conducting investigations of fraud and misconduct. We develop facts and intelligence to support successful
litigation strategies, perform due diligence investigations on prospective deals, and evaluate business
opportunities and the strengths and weaknesses of competitors; and•Cryptocurrency asset tracing and recovery - Kroll Group holistically investigates the technical and nontechnical clues, leveraging off both to identify where the funds went and who was responsible. Kroll Group’s
advantage lies in the diverse skills of its investigative teams, comprised of former prosecutors, forensic
accountants, investigators, computer forensic specialists and intelligence analysts. Kroll Group pioneered theconcept of investigative accounting — the combination of robust forensic accounting with traditional
investigative and intelligence gathering techniques and cutting-edge blockchain analytics. Kroll Group is
involved in several ongoing actions for and against exchanges for the recovery of assets from hacks and thefts,
including the identification of those responsible for the theft of USD tens of millions in BTC from a European
exchange. Recent public engagements include being selected by the US SEC in the AriseBank case to assist
the first ever receiver in an enforcement action against the promoters of an ICO, and being selected by theTrustee in the Quadriga bankruptcy to trace crypto assets following the collapse of the exchange in Canada.

D.

Securing of Assets

Upon their appointment, the Provisional Liquidators immediately sought to secure control of Torque’s Crypto Assets
as a matter of urgency by:•freezing all Torque user accounts on the Torque system (website and application);•securing control of Torque’s Binance Accounts (Main Account and Sub-Accounts) by changing login
credentials and two-factor identification details; and•issuing a formal notification letter to Binance advising of the Provisional Liquidators appointment, requestingthat all Torque Binance Accounts be immediately frozen and various historical trading information provided.

Torque’s Crypto Assets under the control of the Provisional Liquidators comprise approximately 149 BTC
equivalent (across multiple cryptocurrencies) representing a USD equivalent value of approximately USD9.1 million
as at 14 March 2021.

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Torque’s Crypto Assets are comprised of:
Cryptocurrency

BTC equivalent

Estimated value(USD)% Total

BTC

48.42

2,952,186.72

33%

USDT

32.68

1,992,500.69

22%

ETH

25.36

1,546,267.71

17%

XRP

15.75

960,041.94

11%

BNB

10.55

643,151.05

7%

Others16.15

984,410.46

11%

Total

148.91

9,078,558.57

100%

Torque’s management have advised that Torque does not own any assets other than Crypto Assets. The
Provisional Liquidators are making their own enquiries to independently verify this.
E.

Creditor Claims

Based on our preliminary review of Torque’s records and investor database, Torque’s creditor claims are estimatedat USD325 million as at 2 March 2021 across more than 14,000 investors.
As mentioned in the 1st Circular, the Provisional Liquidators are not legally capable of repaying any Torquecustomers until they have properly verified all 14,000 customer claims and completed at least their preliminary
investigations and have been directed to do so by the BVI Court. Given the number of customers and thecomplexity of Torque’s business, the Provisional Liquidators will require time in order to, among other things, (1)ascertain the legal entitlements of customers, (2) verify whether appropriate Know-Your-Client (“KYC”) procedures
were conducted on customers, and (3) set up a proper procedure to verify claims from all creditors in accordancewith BVI law.
These processes will necessarily and reasonably take time and require legal advice and, potentially, the BVI Court’s
direction on matters including (but not limited to):•Assets – establishing entitlements to Torque’s Crypto Assets as between creditors of Torque and othercompeting parties;•

Personal Trading Accounts - certain creditors advise they had an agreement with Torque management
whereby their Crypto Assets were held in specific Torque Sub-Accounts ‘on trust’ for their personal trading.
These Crypto Assets were not deposited on Torque’s Binance Accounts through the Torque website or App
platforms, but separately transferred to Torque’s Binance Accounts. We have requested further supporting
documentation from these creditors and will obtain legal advice to clarify the position; and•Creditor claims – under BVI law, the Provisional Liquidators must ask creditors to submit proofs of debt (“POD”)
that set out the value of their claims and provides relevant supporting details. The PODs and supporting
documents will allow the Provisional Liquidators to review and accept creditor claims. Once the BVI Court has
issued an Order appointing Liquidators (as opposed to Provisional Liquidators), the Liquidators, with thebenefit of these PODs, will pay distributions to all creditors ‘pari passu’ (meaning in equal shares based onvalue). As mentioned in the 1st Circular, Torque has over 14,000 estimated customers spanning more than
120 countries. The Provisional liquidators are considering cost effective methods to undertake this processthat balances the requirements under BVI law to properly validate PODs whilst ensuring the Provisional
Liquidators/Liquidators’ time costs are more appropriately focused on recovering assets for the benefit of
Torque’s creditors.

These legal issues, together with information challenges (explained at Section F.1 below), will require time for theProvisional Liquidators to resolve.
We will write to creditors outlining the creditor claim verification (POD) process in due course.

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F.

Preliminary Investigation Update

Torque’s creditor claims are approximately USD325 million and the Crypto Assets under the control of theProvisional Liquidators are valued at approximately USD9.1 million as of 14 March 2021, representing an apparent
current loss of asset value of approximately USD317 million (“Crypto Asset Losses”).
The Provisional Liquidators’ immediate priority is to conduct a detailed investigation to establish the proportion of
the Crypto Asset Losses attributable to:•

Trading Losses – Crypto Assets Losses resulting from unauthorised leveraged cryptocurrency trading
allegedly undertaken by the former Chief Technology Officer (“CTO”) – where these losses are considered
operational in nature, they are not directly recoverable by the Provisional Liquidators as against thecounterparties to the relevant trades. In any event, legal claims can be pursued for these Trading Losses
against the former CTO for breach of fiduciary duties and other legal bases; and•Misappropriated Assets – Crypto Asset Losses resulting from certain individuals misappropriating Torque’s
Crypto Assets to their personal accounts or accounts of related parties. To date, we have established that
Torque’s former Chief Technology Officer (“CTO”) Wu Zhongyi (“Zee”) appears to have misappropriated atleast 72 BTC (approximately USD5 million in value) from Torque. At all material times, Zee had approvalrights and control of Torque’s Binance Accounts. From our preliminary investigations, it appears that Zeegave instructions to Binance to approve (‘whitelist’) a new BTC wallet address (“Unauthorised Wallet”) using
his Binance Account approval rights. Once the Unauthorised Wallet was approved by Binance, Zee transferred
72 BTC from Torque’s Binance Accounts to the Unauthorised Wallet (“Unauthorised Transfer”). The
Unauthorised Transfer was not transferred through Torque’s nominated company wallet (managed by TorqueVietnam) and therefore was not recorded or recognised on Torque’s system as a transfer. We are in theprocess of tracing the Unauthorised Transfer to the Unauthorised Wallet (refer to Section F.2 below).

The Provisional Liquidators’ investigations of Crypto Asset Losses is necessarily detailed and complex, however
they are focussed on identifying, freezing and recovering Crypto Assets as quickly as possible.
To protect the integrity of the Provisional Liquidators’ investigations, some of these efforts must remain confidential
and we request your understanding in this regard. We will provide you material updates as and when appropriate.
Set out below are the key workstreams being undertaken in respect of the Provisional Liquidators’ investigation:
1)

Securing Torque’s books and records

The first and most critical step of the Provisional Liquidators’ investigation is securing all available information in
respect of Torque’s customers and Crypto Assets held on both (i) Torque’s electronic databases and applications(managed by Torque Vietnam); and (ii) Torque’s Binance system.
Immediately upon appointment, Kroll Group cyber team forensically imaged all of Torque’s back-end databases,
applications and server information. Additionally, the Provisional Liquidators extracted a full transactional reportsetting out all Deposits and Withdrawals from the Binance Accounts.
Given the substantial volume of data, it will take some time to fully reconcile the information available from thevarious sources – this involves (at least) 3.5 million transactions (deposits, withdrawals and trades) from morethan 14,000 customers across two different systems. The Provisional Liquidators are utilising the Kroll Group’s
cyber security and technology experts in this regard.
To date, Torque management and Torque Technologies’ team in Vietnam have been fully cooperative andtransparent – making available all requested information.
2)

Tracing and Freezing Assets

The Provisional Liquidators’ asset tracing activities are focussed on:

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5•Crypto Assets – utilising Kroll Group’s substantial cyber/technology expertise to trace the Unauthorised
Transfer and any other misappropriated Crypto Assets identified to their ultimate digital wallet destinationand identifying the owner of these digital wallets and their location.

•

Other assets of relevant parties – utilising Kroll Group’s substantial investigations and intelligence services to
identify assets globally of Zee and/or any other relevant parties that were the beneficiary of misappropriated
Crypto Assets.

The tracing of both Crypto Assets and other assets will facilitate potential legal and other recovery action against
these individuals in the relevant jurisdictions if the grounds for the same exist. This will likely involve the Provisional
Liquidators applying to courts in the relevant jurisdictions (Singapore, BVI, Vietnam or wherever Torque’s assets
are discovered).
3)

Liquidators’ Legal Claims

Liquidators have several statutory options available to them under the Act to facilitate investigations and asset
recoveries for the benefit of all creditors. Part IX of the Act permits the liquidators to make an application to the
Court for an order requiring a person to make restitution to Torque if they commit one of the following offences:•

Retention or misapplication of money or other assets of Torque by an officer of Torque or a person closely
connected to the formation of, or management of Torque;•

Any person knowingly carrying on the business with intent to defraud the creditors or for any fraudulent
purpose; or•A current or former director of Torque who continued trading knowing the Company was insolvent with noreasonable prospect to avoid going into insolvent liquidation.

To assist in their investigations, the Provisional Liquidators can make an application under section 284 of the Act
to examine a party before the Court. This includes, among others:•

Current or former officers of Torque;•

Current or former members of Torque;•

A person involved with the promotion or formation of Torque;•

A person currently employed (or previously employed within the relevant period) by Torque;•

Any person considered to be capable of giving information concerning Torque; or•

Any person known or suspected to hold assets of Torque or be indebted to Torque.

An examinee is examined under oath and is required to answer all questions the Court may ask or allow to be
asked. A defence of possible incrimination by answering a question is not permitted under the Act.
Additionally, under Part VIII of the Act, the liquidators can review any transaction falling within the relevant
vulnerability period (“Vulnerability Period”) to determine if it is a voidable transaction and the asset is potentially
recoverable for the benefit of creditors. Voidable transactions include, among others:•

Unfair preference payments; and•Undervalue transactions.

The Vulnerability Period is 2 years before the Liquidation appointment date for Connected Persons (related parties),
otherwise 6 months before the Liquidation appointment date.

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The Provisional Liquidators’ prospects of successfully recovering funds for creditors using the above legal claims
will be considered as the investigation progresses and further information is obtained.
G. Common Questions and Answers
The Provisional Liquidators have received thousands of queries from customers in respect of Torque. As set out
in the 1st Circular, the Provisional Liquidators will endeavour to update Torque customers and address any queries
submitted as regularly as possible. However due to the number of customers and volume of queries, responding
to all customer queries individually is not feasible or economical.
The Provisional Liquidators’ answers to individual customer queries will be consolidated and issued to all creditorsand customers in regular updates (“Circulars”) issued by email on posted on Borrelli Walsh’s website(https://www.borrelliwalsh.com/creditors/).
Please find enclosed an Investor Questions and Answers (“Investor Q&A”) document that addresses the common
queries received in the first week of the Provisional Liquidation of Torque.
For any urgent customer, creditor and media enquiries, please contact the Provisional Liquidators at:
torque@borrelliwalsh.com.

Sincerely,

Philip Smith
Joint Provisional Liquidator
Torque Group Holdings Limited(In Provisional Liquidation)

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Investor Q&A
No.

Category

Question

Answer1

ClaimsWhen can I get my money back?

Torque has entered Provisional

2

ClaimsWhat do I need to do to get mymoney back?

Liquidation and all Torque user accounts
will remain frozen for the foreseeable
future.

3

ClaimsCan I withdraw my investment now?

The Provisional Liquidators are notlegally capable of repaying any Torque4

ClaimsCan I still recover my money?

customers until they have properly
verified all 14,000 customer claims and5

ClaimsWhat information do you need to
speed up my refund?

completed at least their preliminary
investigations and the BVI Court directs

6

ClaimsIs there a repayment scheme?

7

Claims

Are there any forms to fill in to
recover my money?

8

9

10

ClaimsClaimsClaims

How much are we expecting to getback from the liquidation?
Why can't I access or recover moneyfrom my personal wallet?
Torque management has promised to
repay all deposits from 8 and 9
February 2021.

11

Future Updates

What do I do now?

12

Future Updates

Where will we receive updates fromnow on?

13

Future Updates

distributions to be made. Given thenumber of customers and the complexityof Torque’s business, these processes
will be challenging.
The Provisional Liquidators aim toprovide an estimated timeline forsecuring / realising Torque’s
cryptocurrency assets and verifying
creditor claims in coming weeks.
In the event that no further assets can berecovered by the Provisional Liquidatorsfrom related parties or third parties, anominal distribution to creditors may bepossible during 2021.
However, in the event that theDo you have updates on thecompany?

Provisional Liquidators investigations
identify legal claims and assets torecovery from related or third parties that
increase the return to creditors, this will
involve litigation across multiple
jurisdictions and take more time.
At this stage, it is too early to determine
the timing and quantum of any
distribution to creditors.
Regular updates ("Circulars") will be sent
via email and uploaded on to Borrelli
Walsh's website(https://www.borrelliwalsh.com/creditors/)

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14

Future Updates

How do I sign up for the mailing
updates on the recovery process?

If you have not received the Circular via
email, please contact us via
torque@borrelliwalsh.com to be added
into the mailing list.

15

Liquidation

What does a liquidation mean?

A company is placed in liquidation when
it is insolvent or when the Court
determines it is just and equitable for thecompany to be placed into liquidation.
Refer to section 2) of the 2nd Circular forthe role and obligations of liquidators.

16

Liquidation

Why is my money from Torque being
used to pay liquidator fees?

At this stage, the Provisional Liquidators
have not used any of the Torque’s
Crypto Assets to pay liquidators’ fees.
However, as a matter of BVI Insolvency
Law, liquidators are typically allowed touse company assets in order to pay theirliquidation fees and expenses with theapproval of the Court or a company’s
creditors.
This is a necessary mechanism to allow
an independent party who acts for the
benefit of all creditors to undertake thework necessary to collect a company’s
assets, investigate and pursue claims
and distribute recoveries to creditors.

17

Liquidation

How long will this process take?

It is too early to determine how long theliquidation of Torque will take tocomplete. A liquidation of this size andcomplexity, that will likely involve
substantial litigation and asset recovery
work across multiple jurisdictions, will not
be a short process.
The Provisional Liquidators will provide
an estimated timeline for securing /realising Torque’s Crypto Assets andverifying creditor claims as soon aspractical and appropriate.
Regular updates ("Circulars") will be sent
via email and uploaded on to Borrelli
Walsh's website(https://www.borrelliwalsh.com/creditors/)

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Investigations

Is this some kind of scam?

19

Investigation

Is there any action being taken
against the offending former
employee?

20

Trading

Will the company start trading again?

Refer to ‘Section F. Preliminary
Investigations’ of our 2nd Circular.

Torque ceased trading immediately on
the appointment of the Provisionalliquidators.
On the basis that Torque is clearly
insolvent (creditor claims greatly exceed
assets), it will not likely everrecommence trading.

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