Cryptocurrency lender Vauld granted three months of creditor protection

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Controversial crypto lending platform Vauld has been granted a short-term suspension of payments from creditors following a three-month moratorium by Singapore’s Supreme Court on Monday.

Vauld’s parent company Defi Payment Limited’s initial request for a six-month moratorium was reportedly rejected by Justice Aedit Abdullah on Aug. Bloomberg report.

Under the moratorium, Defi Payments would be protected from liquidation decisions, the appointment of a trustee or manager and any legal action that could be brought against the company, including proceedings that could be brought by the 147,000 creditors.

Vauld claimed in the updated FAQ on the website Monday that the moratorium would provide the necessary breathing room to come up with a restructuring plan for the company and provide a better outcome for its creditors.

“The moratorium is an important procedure to give the company the breathing room it needs to carefully formulate and consider its options.”

Vauld noted that without a moratorium, it would be “highly likely” that creditors would receive only a fraction of the value of their account.

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As the new protection order expires on Nov. 7, Judge Abdullah says he will grant a reprieve if Vauld is transparent about their progress in repaying creditors.

The crypto platform has also been given two weeks to form a creditors’ committee and provide details of cash flow and asset valuation to creditors.

Investigating the possibility of minimum withdrawals for their remaining clients has also been recommended by the Supreme Court Justice.

Restructuring plan

Vauld stopped withdrawing for its 800,000 clients last month, citing adverse market conditions and an unprecedented $200 million worth of withdrawals in less than two weeks.

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Under the protection of the moratorium, Vauld hopes to formulate a restructuring proposal and explore options to revive the company.

The company intends to present to creditors a restructuring proposal in the form of a detailed explanation with an estimate of the recovery and repayment plans that will be made available to creditors.

Ultimately, Defi Payments plans to convene a creditors’ meeting and hold a vote on whether or not to approve a potential restructuring; however, there is no fixed date yet.

Nexo’s offer to buy

On July 5, Vauld co-founder Darshan Bathija announced: Twitter that cryptocurrency lender Nexo had signed an indicative term sheet, with the intention of potentially acquiring Vauld and its assets.

“The completion of this transaction is pending due diligence – which both teams are currently working on. Vauld has strived to deliver long-term value to all customers, and we think coming under the Nexo umbrella will be significant in this will help to achieve this.”

The term sheet gives Nexo an exclusive 60-day exploration period to conduct due diligence on Vauld operations before making a purchase.

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If the protection order expires before the end of the exploration period, Vauld claims in their website FAQs that it could potentially disrupt the deal.

After the end of the 60-day period, Vauld will be free to negotiate with other potential investors.