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Cryptocurrency lender Vauld applies for protection against creditors

Vauld
TL;DR Breakdown
  • Vauld has filed for bankruptcy due to staggering market conditions.
  • Nexo signed an MOU with Vauld for possible acquisition.
  • Earlier, other platforms such as Voyager Digital also signed for bankruptcy.

Vauld, a Singapore crypto exchange, has moved to file protection from its lenders in Singapore. The move to get a moratorium would give the lender some breathing space to restructure. The firm has been experiencing difficulties with operations since the month began due to falling asset value. The filling of the moratorium comes a few days after the firm suspended withdrawals.

Due to the volatile market conditions, deposits, withdrawals, and trading were all temporarily halted on July 4 by Vauld. This ended a turbulent three-week stretch during which users attempted to remove roughly $198 M from the network.

At roughly the same time, Vauld was going through a run on its assets. CEO Darshan Bathija stated that his company would be laying off thirty percent of its workforce.

The request was reportedly submitted by the corporation on July 8, as stated in a recent post on the blog.

The management has concluded that, given the prevailing conditions, it would be in the most significant advantage of all investors (including lenders) to file the request for a moratorium order.

Vauld

Vauld seeks time to reorganize itself

The move will provide Defi Payments (its Singapore business) and the management of Vauld with breathing room. The firm is setting itself up for the envisaged reorganization, which will be in the interest of all stakeholders.

According to Vauld, it is continuing to engage with Nexo. Nexo signed a memorandum of understanding with them earlier in July for a possible acquisition. However, they are conducting 60-day due diligence to establish if they are closing the deal. Vauld claims that the due diligence period will begin after the 60th day.

An affidavit filed on July 8 by Vauld co-founder and CEO Darshan Bathija revealed that the crypto lender owes $402 million to its creditors. Ninety percent of that debt arises from individual retail investor deposits. Among the investors in the crypto lender are Peter Thiel, Pantera Capital, and Coinbase Ventures.

A moratorium order in Singapore is comparable to a Chapter 11 bankruptcy petition in the United States. In both countries, the legal processes enable businesses to avoid being wounded and carry out daily operations.

Earlier, Nexo disclosed that it had collaborated with the world’s largest banking institution, Citigroup (C.). The collaboration is an effort to merge other crypto lenders who had been adversely affected by the recent market collapse. Rumor has it that Citigroup was planning to expand its position in Asia. Thus, it was looking into acquiring Vauld as part of its preparations.

Vauld bankruptcy is not unique; Voyager Digital came first

The failure of the Terra network in May revealed the over-leveraged actors in the cryptocurrency business. It ultimately led to the bankruptcy of Voyager Digital, Celsius Network, and Three Arrows Capital. Due to a lack of available liquidity, some exchanges have temporarily halted trading activities.

Voyager, for instance, felt the effects of the Three Arrow Capital liquidation almost immediately. In the latter half of June 2022, the business started the marketing process it would use to either raise funds or liquidate all its assets. On June 23, 2022, the firm reduced the maximum amount customers could withdraw from $25,000 to $10,000. Later, the corporation immediately halted all trading as well as deposits and withdrawals.

A week before Voyager filed for bankruptcy, it signed a $500 million revolving fund with Alameda Ventures Ltd. This facility had $200 million in cash and 15,000 Bitcoins. Voyager announced that it would be initiating a “dual-track” restructuring process. The process will culminate in either (x) a buyout or (y) issuing shares in the reformed company to the company’s customers. The sale of the company is the more likely outcome.

Voyager anticipates that it will be able to finance a plan of reorganization using Voyager Tokens, coins, and cash. It also relies on the Three Arrows Capital Recovery. However, this plan is nothing more than a synopsis of the standard options open to any firm that has filed for bankruptcy.

Nellius Irene

Nellius Irene

Nellius Irene is a cryptocurrency investor and journalist who has been in the nascent space since 2018. She has researched and written on several crypto-related topics including non-fungible tokens (NFTs), decentralized finance (DeFi), fundraising, mining, etc. Her major focus is covering regulatory events that are capable of shaping the entire crypto ecosystem.

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