Liquidation

Due to uncertainties relating to the performance fee owed by the Fund for the year 2021 to the Portfolio Manager (and by the Portfolio Manager to the Investment Advisor), a contingent liability in the amount of the maximum performance fee for 2021 of USD 29,380,321 (on realized and unrealized gains and income for 2021) potentially payable to the portfolio manager and / or its sales advisor had to be taken into account at the expense of the fund. The amount was fully deferred and a provision was created in the 2021 accounts in accordance with the principle of prudence.

As a result, the fund found itself in a critical and special situation. The available liquidity was not sufficient to pay the redemption requests and the maximum performance fee in dispute, especially due to the fact that the fund's assets are illiquid.

Despite intensive efforts and negotiations, it was not possible to reach a multilateral agreement between the parties involved, particularly with regard to the disputed performance fee. Legal proceedings have been initiated between the fund's portfolio manager and its former investment advisor.

At the request of the Board of Directors of the investment company, its General Meeting therefore resolved on November 30, 2022 to dissolve Pangea Blockchain International SICAV and the sub-fund Pangea Blockchain Fund and put the fund into liquidation. Sabine Fröhlich was appointed as liquidator. On 25 October 2023 (entry in the commercial register on 10 November 2023) Dr. Helene Rebholz took over the office of liquidator. 

Please do also refer to the publications of April 27, 2022, May 31, 2022, September 1, 2022 and December 5, 2022 on the website of the Liechtenstein Investment Fund Association. ​​​​

In accordance with the accounting principle of prudence, a provision for contingent liabilities in the amount of the maximum (disputed) performance fee of the portfolio manager or its investment advisor for 2021 (calculated on the basis of realized and unrealized gains) in the amount of USD 29,380,321 was established in the fund's annual financial statements for the financial year 2021. 

Neither the fund's Articles of Association dated September 15, 2021 nor the most recent version dated April 27, 2022 are entirely clear in their wording as far as the amount of performance fee is concerned and leave some room for interpretation. For several months, it was not possible to find an out-of-court settlement with regard thereto and significant uncertainty remained regarding the calculation method and the amount and payment of the performance fee for 2021.

In the meantime, a settlement has been reached between the former portfolio manager of the fund and the former investment advisor with regard to the disputed performance fee. It can therefore be assumed that the legal proceedings pending between the parties will be concluded shortly. 

An agreement between the two parties also has implications for the fund: 

The settlement of the dispute between the portfolio manager and its investment advisor regarding the amount of the performance fee due and payable also creates legal certainty and clarity regarding existing contingent liabilities for the fund. Following the exécution of a multilateral Settlement Agreement, the terms of which are at the time (December 2023) under negotiation, a considerable portion of the provisions made can be reversed and available liquidity can therefore be distributed to the investors. At the same time, the future handling of the liquidation process and the necessary sales process for the investments held by the fund will also be part of the settlement and will thus pave the way to engagement of a sales advisor and a (supervising) Sales Committee assisting the Liquidator in the sales process.

The Liquidator will endeavour to support and promote the conclusion and subsequent implementation of the Settlement Agreement and the subsequent sales process, taking into account the interests of all investors.

With registration of the liquidation of the fund in the commercial register on December 2, 2022, the fund no longer pursues the purpose of a collective investment scheme pursuant to Art. 4 para. 1 of the Law of December 19, 2012 on Alternative Investment Fund Managers (AIFMG) and is therefore no longer subject to the supervision of the Liechtenstein Financial Market Authority (FMA).

With opening of the liquidation proceedings, no subscriptions or redemptions of fund units are possible. No new fund units will be issued and existing units cannot be redeemed.

Units in the Pangea Blockchain Fund are however still tradeable and can still be sold to third parties during liquidation.

The former purpose of the fund, the collective capital investment pursuant to Art. 4 para. 1 AIFMG, has been replaced by the purpose of liquidating the fund:

Current business engagements will be terminated, liabilities must be settled in accordance with the order of priority under insolvency law, assets held by the Fund will be sold, outstanding member contributions (if any) must be collected insofar as they are required to cover liabilities, and, finally, the liquidation proceeds will be distributed to the unitholders and shareholders (Art. 136 para. 1 PGR). 

As a result of the change of purpose, contracts that had been concluded to pursue the purpose of the collective investment scheme (such as a depositary agreement, a contract with the former manager (AIFM) of the Fund, a contract with the former portfolio manager of the former AIF) are terminated upon liquidation.

In the ongoing operation of the fund, redemption applications can only be processed subject to the availability of sufficient liquidity. Due to the high provisions that the fund had to make, there was insufficient liquidity to process the redemption applications, meaning that the liquidation of the fund had to be initiated.

Redemption requests that were already placed but not implemented before the liquidation of the Fund was initiated can no longer be taken into account in the liquidation. Unitholders who had submitted such redemption requests are now treated in the same way as the other unitholders and will receive a corresponding share in the liquidation proceeds of the Fund.

The Fund is the sole owner of Pangea Blockchain International, Ltd. ("PBI SPV"), Cayman Islands, which in turn holds the Fund's shares and interests in the respective portfolio companies. 

In the course of the liquidation, the assets held by PBI SPV are to be realized as best as possible. The liquidator will call in sales advisors for this purpose.

The duration of the sales process depends on economic conditions as well as market and liquidity factors, among other things, and is difficult to predict in advance. Taking investor protection into account, the aim is to achieve an efficient sales process while avoiding fire sales.

In the course of the liquidation of the fund, the assets of the fund must be liquidated, i.e. the investments made by the fund or its subsidiary, Pangea Blockchain International, Ltd, Cayman Islands, in various companies must be realized (generally sold).

The duration of the sales process depends on economic conditions as well as market and liquidity factors, among other things, and is difficult to predict in advance. Taking investor protection into account, the aim is to achieve an efficient sales process while avoiding fire sales.

From today's perspective, it is assumed that the sales process will be completed by mid-2025 and that the last distributions to unitholders will be made by the end of 2025. Delays and thus a longer duration of the sales and liquidation process can however not be ruled out.

Liquidity in the Fund which is not required to meet current liabilities can be invested on the money market at the discretion of the liquidator in the interest of the unit holders. Most recently, investments were made in U.S. Treasury Bills (T-Bills) with a term of 1 to 3 months.

Contingent liabilities of the company, in particular the expected costs of the liquidation proceedings, must be covered by available liquidity at all times. As long as this is not the case or to the extent liquidity is expected to be required, available liquidity cannot be distributed. 

In this sense, surplus liquidity that is already available or is generated in the course of the sales process can be distributed to the unitholders on an ongoing basis.

Distributions are made via the (former) depositary or custodian bank of the fund to the unit holders registered with the bank.

In general, liquidation proceeds are only distributed after the assets have been sold and all costs, fees and taxes incurred have been covered (see also Art. 136 PGR). 

It is planned to distribute free liquidity received by the Fund through the sale of assets and which is not required to cover (contingent) liabilities and costs of the liquidation process to the unit holders on an ongoing basis in accordance with their shares via the (former) depositary.

The decision on the timing and amount of a potential distribution prior to the conclusion of liquidation is at the sole discretion of the liquidator. Distributions can only be made if it can be ruled out that creditor interests are jeopardized by an early distribution and all costs persumed to incur are covered.

From today's perspective, it is assumed that the sales process will be completed by mid-2025 and that the last distributions to unitholders will be made by the end of 2025. However, delays cannot be ruled out.

No.

Once the Fund is put into liquidation, the Fund no longer pursues the purpose of collective investment. The tasks of the liquidator are determined by the purpose of the liquidation, which is aimed at terminating the business of the fund and realizing and distributing the assets. The assets of the fund in liquidation are not usually reinvested in this context.

Due to the legal dispute between the former portfolio manager and his former investment advisor, the fund had to account for a provision in the amount of the (maximum) performance fee in dispute.

The fund has to form provisions with regard to its contingent liabilities; as a result of the necessary provisions, it has not yet been possible to distribute cash positions up to the amount of the contingent liabilities. As a result, the cash position had to be invested with the least possible risk and without jeopardizing, hindering or significantly delaying the progress of the liquidation.

The cash positions have therefore been invested in U.S. Treasury Bills (T-Bills) or comparable financial instruments in one- to three-month investment cycles in order to achieve a good liquidation result.

No management fees will be charged to the Fund from the date of liquidation, however the liquidation process will trigger costs which are to be borne out of available assets.

In the event of an agreement between the Fund's former portfolio manager and its former investment advisor and the termination of the pending legal proceedings regarding the maximum performance fee for 2021, the Fund will no longer need to consider the maximum performance fee for 2021 as a contingent liability, which will make it unnecessary to invest the (distributable) cash holdings.

Due to the pending legal dispute between the former portfolio manager of the fund and his former investment advisor regarding the performance fee, it was appropriate to appoint an independent lawyer as liquidator of the fund.

By resolution of the Extraordinary General Meeting on November 30, 2022, the fund therefore appointed the independent lawyer Sabine Fröhlich as liquidator. By resolution of the Extraordinary General Meeting on October 25, 2023, the fund appointed the independent lawyer Dr. iur. Helene Rebholz as (new) liquidator.

Please refer to the published, unaudited NAV as at March 31, 2022 and the website of the Liechtenstein Investment Fund Association . 

The (former) liquidator has called in a valuation specialist to value the fund's investments. The preparation of the annual financial statements and audited annual reports of Pangea Blockchain International, Ltd. ("PBI SPV") for the 2022 financial year is currently still pending. As soon as these are available, an audited annual report will also be prepared and published for the company and the Pangea Blockchain Fund.

From today's perspective, however, it cannot be assumed that this will be the case before Q2 2024.

These FAQs will be updated as necessary.

 For further enquiries, please contact the Liquidator at ​​rebholz@paragraph7.com​ oder +423 220 20 00.

 The liquidator reserves the right to request appropriate proof (proof of ownership or power of representation) when questions are submitted by shareholders or their representatives (e.g. advisors and lawyers) and not to answer any further questions if this is not provided.

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