Case Study
FTI Technology’s Cryptocurrency Valuation Methodologies Result in Unprecedented Testimony in Singapore Court
A valuation dispute involving a fintech and blockchain organization centered around allegations that losses due to the defendants' wrongful conduct prevented the blockchain from reaching its full potential. FTI Technology’s Blockchain & Digital Assets experts were engaged to provide expert valuation services in support of validating claims and resolving the matter.
Situation
This complex and technical matter was the first of its kind in the Singapore International Commercial Court. Given the lack of legal precedent for this kind of case in the country’s court system, there was added scrutiny and emphasis of the accuracy and reliability of the findings. Early on, the legal team recognized the need for defensible and accurate cryptocurrency valuations. An expert with extensive knowledge of cryptocurrencies, tokens and blockchain technology was required to perform a detailed analysis involving the blockchain and its token.
Complex analysis was needed to assess the value of two scenarios: the client’s "but for position," wherein the company would have developed and delivered as originally agreed; and the "actual position," reflecting the current development status and token value.
Our Role
Tasked with developing a robust methodology, FTI Technology analyzed comparable blockchains, calculated valuation multiples and applied these multiples to the blockchain’s projected performance.
The valuation methodology focused on comparing the projected value of the tokens in the "but for position" with their actual value. Analysis relied on market comparisons and valuation multiples due to the lack of income data for an income-based approach. The valuation assessment considered the blockchain's utility, market expectations and comparable blockchain metrics of similar tokens.
Experts also calculated multiples based on the market capitalization ratio to on-chain transaction fees for comparable blockchains like Ethereum, Provenance and Avalanche. These multiples were then applied to the tokens’ forecasted transaction fees to estimate their potential value. The claimants' ownership percentage was used to determine their share of the projected value, which was then compared to the current value of their tokens to calculate the claimed losses.
FTI Technology was responsible for selecting appropriate comparable blockchains, gathering relevant market data and performing complex calculations to determine a range of fair market values for the token. The team also interpreted and applied financial projections from the tokens' investor presentations and white paper to estimate future transaction fees.
Additionally, FTI Technology's role included explaining the valuation methodology and results in a clear, defensible manner for use in legal proceedings. The analysis provided a framework for quantifying the claimants' potential losses, taking into account various market factors and blockchain-specific metrics. This approach allowed for a nuanced understanding of the token’s value proposition and how it compared to established blockchain projects.
Our Impact
Comprehensive valuation methodology
FTI Technology’s Blockchain & Digital Assets practice developed a robust valuation framework combining market comparisons and blockchain-specific metrics to assess the token value.
Quantification of potential losses
Analysis provided a concrete range of calculated losses between USD$20,851,177 and USD$145,934,072 for the claimants.
Expert testimony
FTI Technology’s Blockchain & Digital Assets expert testified in the Singapore International Commercial Court, providing the first-ever testimony in Singapore related to cryptocurrency valuation.
Market-based valuation in emerging technology
The team successfully applied traditional financial valuation concepts to the novel blockchain ecosystem.
Foundation for settlement discussions
The valuation range provided a solid basis for potential settlement negotiations between parties.