MUMBAI/SINGAPORE (BLOOMBERG) - The Singapore High Court has granted the parent of troubled crypto lender Vauld three months' protection from creditors, giving the company breathing room as it seeks to sell itself to rival Nexo.
Justice Aedit Abdullah gave Defi Payments a moratorium that will last until Nov 7, half of what the company had asked for, according to a court hearing on Monday (Aug 2). During this period, the company's 147,000 creditors will be barred from taking legal action against it.
"I am concerned a six-month moratorium won't get adequate supervision and monitoring," the judge said, adding that an extension may be possible based on an assessment on the firm's progress in engaging with its creditors. He asked the company to form a creditors committee to address the issues, and will take note of the progress at the next hearing.
He said Vauld should provide details like cash flow and valuation of assets to its creditors in two weeks and management of its accounts in eight weeks.
Like that of fellow crypto lenders Voyager Digital, Babel Finance and Celsius Network, Vauld's unravelling was swift. The Singapore-based company reassured customers about the health of its business on June 16, only to announce steep layoffs five days later. In early July, Vauld halted withdrawals, trading and deposits on its platforms, and announced that it was in discussions with Nexo.
Ms Sheila Ng, a lawyer for Defi Payments, said on Monday that the firm needed six months of breathing room, including for restructuring, due diligence by Nexo and reconciliation of the group company accounts.
She said the company will take into account the court's suggestion on allowing a minimum withdrawal for its creditors. These include Vauld users with cryptocurrency balances in their accounts, institutional lenders that have lent funds to Defi Payments and vendors.
Mr Antoni Trenchev, co-founder and managing partner of Nexo, said in a message that the company remains "optimistic as to the transaction and how it will hopefully come about".
He added: "But we have to understand the liabilities, the receivables, who the counterparties are, what are the prospects of getting those receivables and, you know, all things like that in order to be in a position to make a decision. And it takes time."
Some crypto lenders offered double-digit yields - as high as 13 per cent in Vauld's case - then made risky bets to generate even higher returns on those deposits. That business model came under strain after the TerraUSD stablecoin collapsed in May, sparking a crash in cryptocurrency markets.
The series of failures will likely lead to greater regulatory scrutiny. Singapore's central bank has already said it is considering introducing more safeguards for consumers in the crypto industry.
Vauld has US$330 million (S$454 million) in assets and US$400 million in liabilities at the group level, chief executive officer Darshan Bathija had said in an e-mail to creditors on July 11.
The company raised US$25 million in a funding round led by billionaire entrepreneur Peter Thiel's Valar Ventures in July last year. Investors in the deal included Coinbase Ventures and Pantera Capital.