Crypto lender Vauld provided three months of protection from creditors

Embattled crypto-lending platform Vauld has been granted a brief reprieve from creditors after being granted a three-month moratorium by the Singapore High Court on Monday.

The initial request by Vauld’s parent company Defi Payment Limited for a six-month moratorium was reportedly rejected by Justice Aedit Abdullah on Monday, citing concerns that a longer moratorium “will not receive adequate oversight and monitoring,” according to a Bloomberg report.

Under the moratorium, Defi Payments would be protected from winding-up orders, the appointment of a receiver or manager and any legal proceedings that may be brought against the company, including any that may be brought by its 147,000 creditors.

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

“The moratorium is an important procedure to give the company the breathing space necessary to formulate and carefully evaluate its options.”

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

While the new protection order expires on November 7, Judge Abdullah says he will grant an extension if Vauld is open 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 customers has also been recommended by the High Court judge.

Restructuring plan

Vauld halted customer withdrawals last month for its 800,000 customers, citing adverse market conditions and unprecedented withdrawals worth $200 million in less than two weeks.

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

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

Eventually, Defi Payments plans to call a meeting of creditors and hold a vote on whether to approve a possible restructuring; but there is no set date yet.

Nexo’s offer for purchase

July 5, Vauld co-founder Darshan Bathija announced on Twitter that crypto lender Nexo had signed an indicative term sheet, with the intention of possibly buying Vauld and its assets:

“Completion of this transaction is pending due diligence – which both teams are working on as we speak. Vauld has strived to deliver long-term value to all customers and we believe that coming under the Nexo umbrella will significantly contribute to achieving this.”

The term sheet gives Nexo an exclusive investigation period of 60 days to conduct due diligence on Vauld operations before committing to a purchase.

If the protective order expires before the end of the investigation period, Vauld claims in its website FAQ that it could disrupt the deal.

After the expiry of the 60-day period, Vauld will be free to carry out negotiations with other possible investors.