Crypto platform Vauld owes $363 million to retail investors

What’s new? On July 8, Darshan Bathija, co-founder and CEO of the Vauld lending platform, asked the Singapore High Court for a six-month moratorium on proceedings while the company explores ways to restructure because of bankruptcy. The filing says the platform owes creditors a total of $402 million. Of that, 90% ($363 million), is attributable to deposits from individual retail investors, The Block writes. Under Singapore law, the moratorium is granted automatically for 30 days from the date of filing. A decision on its extension will be made at a hearing on August 1.

Material from The Block

What else does the statement say? According to court documents, Vauld owes a total of $125 million to 20 major unsecured creditors. One of them owed the company $34 million and three owed more than $10 million.

In addition to the unsecured, Vauld has two secured creditors, the unnamed “Counterparty 1” and the cryptocurrency exchange FTX, to whom it owes $35 million and $4,1 million, respectively. FTX declined to comment.

According to an official statement, Vauld has $287,7 million in assets and consists of various coins, including BTC, ETH and XRP. However, Bathija told The Block that the amount is actually more, $330 million, because the document doesn't include “bank balances.” Including those, the company's debts exceed its assets by $72 million.

The reasons for the financial difficulties of Vauld. The platform's CEO also explained in detail in a written statement what led to the July 4 freeze in customer funds. Bathija cited May's collapse of the TerraUSD (UST) algorithmic stablecoin as the first factor. The company was holding $28 million in UST staking.

The second reason was a further massive downturn in the crypto market, with Vauld losing another $38 million on long positions in BTC, ETH, MATIC and XRP. The third factor, as a consequence of the downturn in the market, was the default on loans by several debtors, as a result of which the company lost another $1,7 million.

A fourth was significant investments, including sponsorship deals with Alfa Romeo and Crystal Palace, an English Premier League football club, totaling $6 million. The lack of a quick return on investment also aggravated the company The last factor that led to the financial difficulties is a bug in the platform software, which led to the loss of about $4,5 million in August 2021.

Immediately after the suspension of withdrawals, representatives from cryptocurrency lender Nexo announced the purchase of Vauld. The parties signed a tentative timeline agreement with a plan to acquire up to 100% of the shares. Under the agreement, Nexo is granted a 60-day exclusive introductory period during which it will conduct due diligence on Vauld.