Vauld, a Singapore-based cryptocurrency lending and exchange start-up, recently announced that it had suspended withdrawals, deposits, and trading on its platform with immediate effect. The three-year-old start-up cited ‘navigating through financial challenges amid the market downturn’ as the reason for suspension.
Vauld is a Singapore-based crypto platform that enables customers to lend, borrow, and trade crypto assets with Bitcoin (BTC), Ethereum (ETH), Tether (USDT), and other significant cryptocurrencies from one unified platform. The company counts Valar Ventures, Coinbase Ventures, and Pantera Capital among its backers.
In a blog post on the company’s website, Darshan Bathija, Vauld’s co-founder and CEO, talked about the financial difficulties of business partners and customer withdrawals. He explained how the circumstances had prompted customer withdrawals of about $198 million since the 12th of June as the cryptocurrency market declined after the collapse of Terraform Lab’s UST stablecoin, followed by Celsius Network pausing withdrawals and Three Arrows Capital defaulting on loans.
Bathija said the start-up is considering restructuring options and has reached out to Kroll for financial advice. The company has also consulted Rajah & Tann and Cyril Amarchand Mangaldas for legal advice in Singapore and India, respectively. The start-up has expressed intentions to apply for a moratorium at the Singapore courts.
While announcing the hiatus, Bhatija said that the company is seeking the understanding of its customers on the Vauld platform as it is not in a position to process any new or further requests. Certain arrangements will be made for customer deposits as necessary to meet margin calls in connection with collateralized loans. The announcement was followed by Vauld cutting its workforce by 30% about two weeks ago.
While the reason for the suspension is apparent, the move on behalf of Vauld does come as a surprise to the industry. On the 16th of June, after crypto lending platform Celsius announced increasing financial challenges, Bathija assured Vauld’s customers in a tweet that the platform was not headed toward the predicament of Celsius. He also affirmed that Vauld is far from the fate of Three Arrows Capital, another one of the high-profile cryptocurrency platforms that filed for bankruptcy.
Bhatija had stated earlier that Vauld would remain liquid despite market conditions. He also informed all withdrawals were processed as usual over the last few days and will continue to be the same in the future. However, the withdrawal announcement after such an affirmative statement might be confusing for some to wrap around their heads.
Recently, FTX’s US-based subsidiary signed an agreement with another financially strained crypto lender BlockFi. The deal gives FTX the option to buy the startup for up to $240 million based on its performance. BlockFi was among those firms that liquidated some positions held by Three Arrows Capital. It was valued at $3 billion in a financing round.
According to the company website, Vauld enables customers to earn the industry’s highest interest rates on major cryptocurrencies. The site says it offers 6.7% annual yields on staking Bitcoin and Ethereum tokens and 12.68% yearly yields on stablecoins such as USDC and BUSD. It also allows customers to borrow against their tokens and several other trading services. Vauld says, on its website, that it offers users the ability to borrow up to a Loan To Value (LTV) of 66.67% against their tokens.
Many crypto tokens like ethereum, binance coin, and tether have fallen by over 50% in value in the past six months, like several tech stocks. The major reason for the fall is the panic sell-off by investors, especially whales, amid the increasing fear of inflation. In a recent podcast, Binance founder and chief executive Changpeng Zhao said that Binance has engaged with over fifty firms to strategize funding and bailing out opportunities for companies in recent weeks. Several crypto experts have warned in recent weeks that many more decentralized finance (DeFi) platforms are on the verge of facing a collapse as financial constraints cripple the businesses, same as Vauld.
While this might seem like an endgame for Vauld, this temporary hiatus is not expected to be the end of this cryptocurrency startup. Recently in a tweet, Bhatija expressed his confidence in the fact that with the advice of their financial and legal advisors, Vauld will be able to reach a solution that will best protect the interests of its stakeholders and customers.