After its merger with Nexo fell through, beleaguered cryptocurrency exchange Vauld successfully petitioned a Singapore court to extend its creditor protection.
Because client funds are still blocked, Vauld has until February 28, 2023, to develop a reorganisation plan. It had previously set a deadline of January 20, 2023.
According to an affidavit, once Vauld’s arrangement with Nexo fell through, two fund managers are interested in purchasing the company. Nexo signed a deal sheet in July 2022 to acquire the Singaporean exchange, after the exchange rejected a recent offer. After clients withdrew $200 million in the aftermath of the Terra Luna implosion, Vauld suspended withdrawals in early July 2022.
Tensions erupted in the first week of January 2023, when Nexo claimed that Vauld is pushing its retail customers down the pecking order by declining its takeover offer.
Nexo’s recent announcement that it will phase out its US operations has raised questions about whether it would repay Vauld’s US creditors if it acquired Vauld. Furthermore, police recently searched Nexo’s Bulgarian branch in Sofia, alleging the lender’s involvement in tax evasion and money laundering.
With Nexo’s departure, Vauld now faces a battle to secure money in order to stay afloat and avoid bankruptcy. The Singaporean firm owes creditors over $400 million, with retail customers accounting for nearly $363 million of the total.
If the exchange is unable to reach an acquisition agreement by February 28, 2022, its retail customers may be among the last to be compensated.
Furthermore, the waning interest in crypto venture capital investments suggests that many wealthy investors are making better-informed decisions based on a company’s financial health and success possibilities.
Crypto investments are already down three-quarters year on year, at around $2.3 billion at press time. While investment began to slow in early 2022, the high-profile collapse of FTX caused the most dramatic drop, which is ironic given FTX’s previous CEO’s reputation for jumping in to aid struggling enterprises.
Several companies, including FTX, failed in part due to poor risk management, which rendered them unable to survive prolonged periods of the liquidity crisis.
While not an investment fund, Binance’s rehabilitation fund focuses on crypto startups that have suffered from such consequences. The fund solicits pledges from various partners to assist other businesses that meet tight eligibility standards. These include a firm’s long-term value development, a clearly-defined business model, and solid risk management.