Contagion spreads in digital currency markets as Vauld suspends withdrawals

Getting your Trinity Audio player ready...

Over the past few weeks, the digital currency industry has imploded as hedge funds, lenders, and exchanges go bust in the face of cascading liquidations, margin calls, and the equivalent of bank runs.

Just as things seemed to be settling down, Vauld, a lender backed by Coinbase (NASDAQ: COIN), has suspended withdrawals and hired advisors to explore restructuring.

Vauld joins Celsius, Voyager, and others in liquidity crisis

Just a few weeks ago, amidst the most chaotic leg of the recent market meltdown, Vauld posted an update on social media to reassure its users that everything was fine.

Vauld continues to operate as usual

"We have always maintained a balanced and conservative approach to liquidity management. Bull and bear runs are inevitable, and we deploy fundamentally strong strategies that account for these cycles."

Read more here: https://t.co/6yWVozTydE

— Vauld (@VauldOfficial) June 16, 2022

It’s a script that’s all-too-familiar at this point. Just hours before Celsius suspended withdrawals, CEO Alex Mashinsky took to social media to call out “FUD and misinformation” about the company, asking if users could point to a single time the company had refused a withdrawal.

It seems that Vauld may have learned from the Celsius playbook. Less than three weeks later, it has pulled the same move as Celsius, bringing in top Singapore lawyers and financial advisers to figure out its next move while holding customer funds hostage.

Did Vauld lie in its reassuring Tweet, or are things worsening by the day behind the scenes as major digital currency hedge funds like Three Arrows Capital hit the proverbial wall? Only Vauld CEO Darshan Bathija and his inner circle know the answer to that.

The dominos keep falling—will it stop with Vauld?

In recent weeks, we’ve seen some of the biggest names in the digital currency industry brought to their knees by rapidly falling prices and the tsunami of liquidations that have followed. Celsius, Babel Finance, and Voyager Digital have all found themselves in hot water as Three Arrows Capital founders Su Zhu and Kyle Davies run for cover as their overleveraged empire implodes around them.

Will it stop with Vauld? Nobody can say for sure, but it doesn’t take Sherlock Holmes to work out that things aren’t looking great in the digital currency space, and it doesn’t take John Watson to logically deduce that you can’t believe a word anyone in the space says. If everything were literally on the brink of utter collapse, smooth talkers like Alex Mashinsky would be there to reassure us that it was all just fine and dandy and that nobody should panic.

Incompetence, lies, and deceit at the heart of ‘crypto’

What all of this has shown is that people at the highest levels of the digital currency space are a frightening combination of incompetent and downright dishonest. Wonderkids like Do Kwon and Su Zhu have been revealed as nothing more than overconfident gamblers, and those who run platforms like Celsius and Vauld have proven that what they say on any given day will likely be at odds with the facts soon after.

In short, nobody has a clue what is happening, and it’s all coming down faster than anyone anticipated. In keeping with the proverb ‘no honor among thieves,’ all the pirates are turning on each other in an attempt to grab whatever treasure they can and flee the sinking ship.

Celsius, Babel, Voyager, and Vauld are just the names we know about, but as Sam Bankman-Fried recently confessed to Forbes, plenty of others in the space are “secretly insolvent.” What he knows is anyone’s guess, but sooner or later, we’re all going to find out.

Follow CoinGeek’s Crypto Crime Cartel series, which delves into the stream of groups from BitMEX to Binance, Bitcoin.com, Blockstream, ShapeShift, Coinbase, Ripple, 
Ethereum, FTX and Tether—who have co-opted the digital asset revolution and turned the industry into a minefield for naïve (and even experienced) players in the market.