Crypto Lender Vauld Granted Three-month Protection From 147,000 Creditors

Key Insights:

• Vauld will get three months for restructuring and a potential sale to Nexo.
• The company suspended withdrawals in July after the Terra collapse.
• It has around 147,000 creditors that can’t access funds.

On August 1, Singapore High Court awarded Vauld’s parent company, Defi Payments Ltd., a moratorium that would last until November 7, half the company requested. The company is attempting to sell itself to rival crypto insurer Nexo.

Justice Aedit Abdullah expressed concern that “a six-month moratorium won’t get adequate supervision and monitoring.”

Earlier this month, FXEmpire reported that the Coinbase and Peter Thiel-backed cryptocurrency lending and borrowing platform had suspended withdrawals as it faced liquidity issues.

During the three months, Vauld’s 147,000 creditors will not be able to take action against it, according to Bloomberg.

$400M in Liabilities

The court stated that Vauld should provide details such as cash flow and valuation of assets to its creditors. The judge said that this needs to be completed within two weeks and management of its accounts needs to follow within eight weeks. He also asked the company to form a creditors committee to address these issues.

Singapore-based Vauld was launched in 2018, offering digital asset trading, custody, and crypto credit. The firm raised $25 million in a Series A funding round in 2021. According to a letter from Vauld CEO Darshan Bhatija to creditors in July, the firm had $330 million in assets and $400 million in liabilities at the group level.

Lawyers representing the firm wanted six months to restructure, reconcile company accounts, and perform due diligence by Nexo. The judge said that an extension to the three months would be considered.

Co-founder and managing partner of Nexo, Antoni Trenchev, commented that the company was optimistic, “but we have to understand the liabilities, the receivables, who the counterparties are, what are the prospects of getting those receivables.”

Vauld was among the crypto companies offering unrealistic yields – 13% in its case. This sparked leveraged borrowing and overextended positions, which all came crashing down with the Terra stablecoin ecosystem in May.

On its website, Vauld explained that one of its methods for generating cash was by converting fiat-backed stablecoins (such as USDT and USDC) into higher-yield stablecoins such as Terra’s now defunct UST.

“As Defi Payments had staked a significant amount in UST of an estimated ~US$28m, the collapse of the price of UST caused Defi Payments’ net asset position to decrease sharply.”

The cascade of events caused similar problems for Voyager Digital, Celsius, Three Arrows Capital, BlockFi, and a number of crypto lending firms.

Crypto Markets in Retreat

Cryptocurrency markets have fallen for the second day this week, dropping 3.5% over the past 24 hours. As a result, total capitalization has fallen back to $1.1 trillion.

Bitcoin (BTC) was down 2.3% to $22,901 at the time of writing, whereas Ethereum (ETH) had lost 6.4% in a fall to $1,585.

The July rally appears to have run out of steam in August, and a breakdown of key support levels could see an accelerated sell-off.