Vauld Crypto Lender Owes $363 Million to Retail Investors After Stopping Withdrawals
According to legal documents, Vauld, a troubled Asian crypto lender that abruptly stopped customer withdrawals this month, owes $363 million to retail investors. He owed one of them $34 million.
Affidavit filed by Vauld Co-Founder and CEODarshan Batij in the Singapore High Court on July 8 and emailed to the firm's clients on July 18, shows that the crypto lender owes creditors a total of $402 million. Of this amount, $363 million, or 90%, comes from deposits of individual retail investors.
The document states that Vauld owes a total of $125 million to its 20 largest unsecured creditors, all of whom appear to be individuals, with the exception of one unnamed "Party A". Three creditors owed more than $ 10 million each, with the debt of the largest creditor amounting to $ 34 million. Unsecured creditors have one of the lowest priorities in an insolvency situation, giving way to secured and preferential creditors, and do not have a security interest in any asset of the debtor.
Singapore-based Vauld suspended customer withdrawals on July 4 in an attempt to prevent insolvency. The next day, Nexo's London-based competitor began the process of potentially acquiring Vauld by signing an agreement on terms that provided a 60-day exclusive research period for due diligence.
In addition to unsecured creditors, Vauld has two secured creditors - an unnamed "Counterparty 1" and FTX Trading Ltd. - to whom the company owes $35 million and $4.1 million, respectively.
The sworn letter states that Vauld's assets amount to $287.7 million, consisting of various coins, including bitcoin, ether and XRP. But Batija said Vauld's total assets are actually worth about $330 million because the affidavits do not list "bank account balances." That means Vault has a deficit of about $70 million, which it reported earlier this month.
Non - conception Vauld
In the affidavit, Vauld also explained in detail what caused his financial difficulties.
The first factor was the May crash of the algorithmic stablecoin TerraUSD (UST). Vauld invested about $28 million in UST according to the affidavit, which led to a sharp reduction in his net assets.
Then, the broader downturn in the cryptocurrency market that followed the collapse of UST led to further losses for Vauld. The firm has taken "long positions in cryptocurrencies such as Bitcoin, Ethereum, Matic and XRP, which are currently valued at approximately $37 million," according to written testimony.
The third factor was the defaults of several debtors on loans due to the fall in the market.
"A number of Vauld debtors who borrowed cryptocurrencies on the Vauld platform without collateral failed and defaulted on their loans," the affidavit says. As a result, the unexpected bankruptcy of Wold's borrowers resulted in outstanding debts of "about 85 BTC (~$1.7 million) with no hope of repayment."
Fourth, Vould has made several significant investments, including sponsorship agreements with Alfa Romeo and Crystal Palace football club from the English Premier League for a total of $ 6 million. According to the written testimony, they were signed in September 2021 and March 2022, respectively.
"Despite the fact that they were concluded when the Vauld Group had a relatively stable financial position, the lack of immediate income exacerbated DeFi Payments' short-term financial difficulties," the affidavit says.
DeFi Payments is the name of Vault's Singapore division. According to written testimony, the firm has various divisions, including in India, the United States, Great Britain, Turkey, Lithuania, Ireland and the Seychelles.
The last factor that led to Vault's financial difficulties is a software bug in its platform, which, according to affidavits, led to losses of about $4.5 million in August 2021.
Hearing on the moratorium
To get a break, Vauld on July 8 applied to the Singapore High Court with a request to impose a moratorium, which is a suspension of the start or continuation of any legal proceedings against the company while it studies restructuring options.
In accordance with Singapore law, the moratorium comes automatically for 30 days after the application is submitted, Vauld told his clients in an email sent on July 18. Bhatija confirmed that the hearing will take place on August 1 and said that Vauld is seeking a 6-month extension of the moratorium.
If Vauld doesn't get an extension, the company will have "less time to evaluate our options," Bhatija said. When asked whether insolvency proceedings would begin if an extension was not granted, Bhatija replied:
"Not necessarily. We are not going down this path. We aim to close the deal with Nexo."
It is still unknown how the comprehensive Nexo check will take place. If it turns out to be unsuccessful and Nexo does not conclude a deal with Vauld, then the latter may go the other way that he previously indicated. These include raising additional venture capital, converting debt into equity, issuing your own token, and developing a payment plan tied to future earnings.
Meanwhile, legal groups of creditors have already appealed to Vauld with claims. These letters from Lions Chambers LLC, Covenant Chambers LLC and Spice Route Legal, according to written testimony, require a total of more than $2 million.
"We expect that new demands and threats to launch a lawsuit will follow," the sworn letter says.
Vauld is ultimately seeking the support of creditors, as this is one of the factors that will determine whether the troubled crypto lender will receive an extension of the moratorium, according to the email.
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