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Several Vauld Creditors Take 'Hostile' Action Against The Firm, New Affidavit Shows
A new Vauld affidavit obtained that some creditors of the troubled firm have taken ‘hostile’ action against it while it explores restructuring options. A chunk of Vauld’s creditors, however, has shown support for its moratorium extension application, per the affidavit.
Ankita K.
2:47 27th Jul, 2022
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Several creditors of troubled Asian crypto lender Vauld, which abruptly halted client withdrawals earlier this month, have taken "hostile" action against the firm.

Vauld owes a total of $402 million to its creditors. Of that sum, $363 million — or 90% — comes from individual retail investors' deposits.

The new affidavit, filed today by Vauld co-founder and CEO Darshan Bathija in the High Court of Singapore, reveals that four individual creditors of Vauld have commenced originating claims and issued demand letters to the firm.

Originating a claim means a party (the claimant) has started a civil claim against another party (the defendant). Vauld has received two originating claims and two demand letters from the four creditors, per the new affidavit.

Claim amounts of the creditors aren't mentioned in the affidavit except for one creditor who has claimed around $340,000 plus interest through a demand letter.

Notably, Vauld's first affidavit did not mention that creditors were taking "hostile" action against the firm, as reported at the time. Vauld had received several, separate letters of claims at the time from select creditors, claiming a total of more than $2 million.

Vauld issues

Vauld halted client withdrawals on July 4 after facing financial difficulties caused by TerraUSD's (UST's) implosion and the broader crypto market downturn.

On July 8, Vauld applied for a moratorium in the Singapore High Court on new or in process legal proceedings against the company while it explores its restructuring options, including a potential Nexo deal.

The creditors who have taken hostile action against Vauld do not support the moratorium extension, Hagen Rooke, a partner at Singapore-based law firm Reed Smith, told The Block.

Vauld is seeking a moratorium extension for six months. A hearing in that regard is scheduled for August 1 in which the court will decide whether to grant Vauld the extension or not.

Creditor support is one factor that would determine the court's decision and Vauld seems to have received that support, according to the new affidavit. The firm requested creditor support via a Google form and the deadline to submit the form was today, 6 pm Singapore time.

According to data until July 26 at noon Singapore time, 2,910 creditors submitted their forms out of the total of around 147,000 Vauld creditors, per the affidavit.

Out of the 2,910 respondents, 2,280 (approximately 78.3%) indicated that they are in support of the moratorium extension, per the affidavit. Around 15% or 442 respondents did not take a position and about 6.5% or 188 creditors objected to the moratorium, per the affidavit.

Vauld's seventh largest creditor, an individual with a claim amount of approximately US$3.5 million, has also shown support, according to a separate affidavit filed by them in the court.

The moratorium extension would provide Vauld "with the time necessary to assess various restructuring strategies that would result in the best possibility of the creditors recovering their respective investments," notes the creditor in their affidavit.

Nexo deal?

Vauld rival Nexo is still doing its due diligence on Vauld for a potential acquisition. Nexo started the due diligence process on July 5 by signing a term sheet that granted it a 60-day exclusive exploratory period to conduct the procedure.

Vauld's seventh largest creditor who supports the moratorium extension remains hopeful of the Nexo deal, noting in their affidavit that "the presence of Nexo Inc. and its complete acquisition of the Vauld Group would result in the satisfaction of all liabilities owed by the Applicant to its unsecured creditors".

The creditor also believes that even if an investment agreement with Nexo does not materialize, Vauld's business "remains attractive to other competing businesses of Nexo Inc and the Applicant would receive further offers for acquisition."

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