The Singapore High Court has ordered Sparrow Tech – whose cryptocurrency platform was sold to and now becomes part of the Temasek-backed digital asset platform Amber Group – to pay US$803,663.83 in advisory fees to its former consultant LinkChina Capital.

This comes as LinkChina was hired in August 2021 as Sparrow’s exclusive consultant for a 3% success fee on the enterprise value and introduced Amber Group as a buyer.

An initial US$50 million valuation depended on a major payment institution license from the Monetary Authority of Singapore, which was not obtained, causing the original deal to collapse.

Sparrow then gave one month’s notice to terminate LinkChina’s contract in May 2022.

However, Sparrow resumed talks with Amber amid a liquidity crunch due to its shareholders unwilling to invest fresh capital, as the crypto market started to crash in late 2021.

Sparrow also had US$17.1 million of its crypto assets frozen by Vauld crypto lending platform, which suspended withdrawals in July 2022.

A new share purchase agreement (SPA) was later signed in July 2022 and completed in November 2022.

A court judge calculated enterprise value using SPA components: US$16.9 million minus third-party indebtedness of US$21.6 million, plus Vauld recoveries of US$6.1 million and maximum contingent payments of US$4 million, reaching to an equity value of US$5.4 million.

LinkChina had invoiced US$1.6 million based on a claimed enterprise value of US$54.8 million – resulted from the total debt of US$21.6 million and added by the equity value, subtracted by US$200,000 in cash.

The court finally awarded a reduced fee based on the adjusted enterprise value, although Sparrow refused to pay the fee and argued both parties had never agreed on the value.

The court ordered a 5.33% annual interest from the writ date plus costs.

🔗 Source: The Business Times