- Vauld, a Singapore-domiciled crypto lending platform, suspended withdrawal and halted all operations on 4th July, firing 30% of their staff.
- CFO Jatin Malcazar resigned from Vauld on Monday.
- Vauld said it had net liabilities of about $70 million on its balance sheet.
- Vauld investors are hoping London-based Nexo’s acquisition of Vauld would come through.
The year 2022 started well for Vauld, a Singapore-domiciled cryptocurrency exchange. It had raised $27 million in Series A seed funding the year before. Its founders had made it to the Forbes Asia Finance and Venture Capital 30 under 30 list. And then everything unravelled, rapidly.
In the last week of June, it laid off 30% of its staff. On July 4, Vauld froze all withdrawals. The company’s CFO Jatin Malcazar left the Asian lender abruptly on Monday, barely a month and a half after he had joined the group. In a letter issued to the shareholders on Monday, Vauld confirmed the company’s financial liabilities.
“On a group level, Vauld has assets worth $330 million and liabilities worth $400 million at this time. We have always strived to be a company that gives you the most value. We are exploring multiple ways forward to deliver on that promise. Our top priority is to complete the due diligence process with Nexo,” said Vauld.
Nexo is a London-based platform for providing instant crypto loans, where you can also buy, earn interest or swap cryptos. Nexo has offered to
acquire 100% of Vauld, signing an indicative term sheet a week ago. The deal, however, has not been finalised yet.
Vauld was founded in 2018 and sells and borrows crypto with no brokerage fees. Its backers include PayPal founder Peter Thiel, Pantera Capital, Coinbase Ventures, CMT Digital, Gumi Cryptos, Robert Leshner and Cadenza Capital. The returns promised were based on making SIPs in crypto, with an interest of 9-12 percent.
Vauld’s freezing of withdrawals came out of the blue. Just three weeks earlier, Darshan Bathija, co-founder of Vauld, had sent a message to his users, affirming all was well. So, what then went wrong? Why did Vauld suddenly halt withdrawals?
A collateral damage of crypto winter?
The beginning of 2022 marked the start of a biting crypto winter, with its market value falling to less than $1 trillion since January 2021. The first blow was the crash of stablecoin Terra Luna, which wiped $500 million off the market. In June 2022, crypto lending platforms like Voyager and Celsius also collapsed.
A tweet put out by Vauld explained that the company faced a withdrawal of over $200 million since June 12, 2022, triggered by the collapse of Terraform Lab’s UST Stablecoin, Celsius Network pausing withdrawals, and crypto hedge fundhedge fund 3AC defaulting on loans.
When asked the reason behind the collapse, Bathija, in a Telegram group said, “We are facing challenges despite our best efforts. This is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate.”
With Vauld’s liabilities at $70 million, Vauld team is optimistic that the Nexo deal will come through.
“We have seen concerns around what our alternative options are in case the Nexo acquisition does not happen, we want to address that head on”, said Bathija in a note issued by Vauld on Monday.
Vauld claims to have customers from 190 countries with the average customer depositing $20,000. The majority of users are Indians, making up over 20 percent of its assets under management. In Vauld’s telegram, users have been listing their concerns, talking about the extent of money that will be lost if the acquisition with Nexo does not come through.
Customers have millions stuck
The problem is compounded by the fact that the customers’ money that is stuck is in two forms- crypto and fiat (INR).
A user shared a screenshot of their wallet, claiming to have Shiba Inu ( a decentralised cryptocurrency like dogecoin) worth $1000 million stuck in Vauld.
Pritish Kumawat, co-founder and CEO at XBT Labs Pvt Ltd said, however, has his money in fiat form.
“We are talking about money worth $100 million in question here. My firm alone has ₹2.2 crore stuck in INR balance. We trusted Vauld but we could see trouble brewing for over a month now,” Kumawat said.
Kumawat added that while other mega crypto exchanges of India were under maintenance to efficiently implement India’s new crypto tax rules, Vauld had done no such thing. Another investor, an advisory financial firm in the USA called Prosperity Fund, says it is elated that it did not invest a large amount in Vauld.
“Even though our firm puts capital in assets like crypto to analyse its legitimacy for our users, we were glad that we only put half a million with Vauld. We backed it because of its highly engaging customer service and good user experience,” Prosperity Fund Director Ariel Fisherman told Business Insider.
“However, we are positive the Nexo deal will come through. When Nexo agreed to bail out Celsius with over a billion liabilities, $70 million should be a small amount for them,” Fisherman added.
Will customers get their money back?
Since the communication put out by Vauld on Monday, there is widespread belief that the Nexo deal would come through, as the liabilities were seen to be manageable.
Bathija said, “While we are very optimistic about joining forces with Nexo, on the off chance that we can’t make it work, our plan will include a combination of raising more venture capital, exploring alternatives for acquisition, wait for deployed capital to be returned, convert debt into equity or issue our own token.”
Another way users might regain their money is by taking a “haircut” on their deposits.
“Seems like users will have to take a haircut on their deposits or be made whole through other means like tokens or equity swap similar to what Voyager is planning”, added crypto trader Saleem.
It is a concern for firms like XBT Labs who have their money stuck in the form of INR balance. “We, as Indian users of Vauld, would want Vauld to return the INR balance as it is, without converting it into crypto. Voyager is returning USD to their customers. The same should happen here,” said Kumawat.
Vauld is registered in Singapore, but has an Indian unit, Flipvolt Technologies, that is registered in Coimbatore and is owned by Bathija and his wife Kirthi Bathija.
Some users still trust Vauld to come through this crisis, while others have threatened to sue the company if the Nexo deal gets cancelled. Either way, for Vauld investors, it’s now a game of wait and watch.