Vauld “burdens” more than 363 million USD despite blocking users from withdrawing

Vauld — An Asian crypto lender abruptly stopped withdrawing customer funds this month, while owed $363 million to the platform’s investors.

Debts of crypto lender Vauld

On July 18, in an email to his client, Vauld shared the affidavit submitted to Singapore Supreme Court of CEO and co-founder – Mr Darshan Bathija. This content reveals Vauld’s total debt 402 million USD. In there, 363 million USD accounts for up to 90% – are deposits of individual investors.

Total debt of $125 million to 20 large unsecured creditors, all individuals, except for an unnamed “party A”. There are 3 creditors, each with more than 10 million USD, the largest is 34 million USD of them. Unsecured creditors will be given the lowest priority in the event of Vauld’s insolvency, behind secured and preferred creditors, with no secured interest in any assets. which of the debtor.

Vauld is a Singapore-based crypto lender that has halted customer withdrawals starting from July 4 so far and no further announcements have been made. The reason is said that the company is doing its best to prevent default.

On the 5th of July shortly after, one of Vauld’s opponents was Nexo based in London, England, signaled to acquire Vauld when it signed a list of terms allowing a 60-day deliberation period to review the deal.

In addition, Vauld has two secured creditors – an unnamed “Partner 1” and FTX Trading Ltd. of Sam Bankman-Fried with debts of $35 million and $4.1 million, respectively. Vauld has now reimbursed FTX, but the company declined to comment further.

In the affidavit, Vauld’s net worth is $287.7 million, which includes various currencies such as Bitcoin, ETH, and XRP. However, the company’s CEO – Mr. Bathija revealed that the real number is about 330 million USD. The reason is because the affidavit does not include a bank balance.

Trouble surrounds

The reasons for the plight of Asia’s leading crypto lending platform are also explained in the affidavit.

First factor Not to be missed is the collapse of stablecoin TerraUSD (UST) in May that sent the entire market reeling. Vauld was one of the investors in the Terra ecosystem when he put $28 million into UST, as detailed in the affidavit. This has caused the company’s asset position to plummet.

Next, LUNA – UST shock continued to affect other “bloody” companies when the 3AC investment fund collapsed, Voyager and later Celsius. Obviously Vault was not outside of the above impacts, although the company was “Long” positions for BTC, ETH, Matic or XRP, currently valued at ~$37 million.”

The third factor lies in the fact that other of Vauld’s debtors also declared defaults when the market crashed. Quote from the affidavit:

“Some of Vauld’s debtors who borrowed crypto on the Vauld platform without providing collateral have collapsed and defaulted. As a result, the “sudden” bankruptcy of individuals and entities that borrowed money from Vauld resulted in an outstanding debt of “approximately 85 BTC (~$1.7 million) that many companies understand with little or no hope to get it back.”

Wednesday, Vauld has made a number of significant investments, such as sponsoring Alfa Romeo and Crystal Palace Football Club from the English Premier League for a total of $6 million. The signing of these sponsorship deals is in September 2021 and March 2022, respectively, according to the affidavit.

“While these were included while Vauld Group was in a relatively stable financial position, the lack of immediate returns exacerbated DeFi Payments’ short-term financial difficulties.”

DeFi Payments is the name of the organization Vauld’s Singapore. The company has various branches located in India, USA, UK, Turkey, Lithuania, Ireland and Seychelles.

Final, What led to Vauld’s financial difficulty was a software bug in its platform that caused a loss of about $4.5 million in August 2021, according to the affidavit.

Vauld’s hearing

Faced with growing financial pressure, on July 8, Vauld applied to the High Court of Singapore for an adjournment, i.e. halting the initiation or resumption of any legal proceedings against the company. while exploring restructuring options.

Under Singapore law, an automatic 30-day moratorium arises upon application. The court will decide whether to extend the adjournment order at the next hearing. CEO Bhathija confirmed that the hearing will take place on August 1, and said Vauld is seeking a six-month extension. The CEO emphasized that if Vauld doesn’t get the extension, the company will “less time evaluating options.”

When asked if bankruptcy proceedings would begin if the extension is not approved, Bhathija replied that: “Not necessarily. We will not go that route. We are committed to closing the transaction with Nexo.”

Analysts say that it is still necessary to monitor how Nexo’s due diligence process will be. If an agreement between Nexo and Vauld is not reached, Vauld may have to calculate another path of existence. Be it raising venture capital, converting debt to equity, issuing private tokens, or developing a payment plan tied to future revenue.

It is known that during this waiting period, groups of legal creditors contacted Vauld to file a letter of complaint. This group of creditors includes: Lions Chambers LLC, Covenant Chambers LLC and Spice Route Legal, which, according to the affidavit, claim a total of more than $2 million.

“We anticipate that there will be many requests and threats to initiate legal action,” CEO Bhathija said in the affidavit.

The company is still looking for the best solution, especially the support from creditors, because this is a factor that will determine whether Vauld will be able to extend the moratorium or not.