Digital asset lending platform Vauld has filed for bankruptcy protection, joining the growing list of ‘crypto’ lenders that make Monty Python’s dead parrot look downright effervescent.
On July 8, the Singapore-registered/India-based Vauld filed an application for a moratorium order under section 64 of Singapore’s Insolvency, Restructuring and Dissolution Act 2018. The company, which owes $402 million to its creditors—primarily retail customers—is seeking a six-month pause on any order or resolution to “wind up [parent company] DeFi Payments, and any commence or continuation of any proceedings against DeFi Payments.”
Four days earlier, Vauld had warned the public that “we are facing financial challenges despite our best efforts.” Vauld said panicked customers had withdrawn $197.7 million from the platform since June 12, forcing the lender to “suspend all withdrawals, trading and deposits … with immediate effect.”
The company cited “volatile market conditions, the financial difficulties of our key business partners … and the current market climate” as contributing to its current woes. The collapse of Terraform Labs’ UST algorithmic stablecoin, the Celsius network being exposed as a Ponzi scheme and digital currency hedge fund Three Arrows Capital (3AC) doing its best Lehman Brothers impression all apparently helped sink Vauld’s boat.
In a move reminiscent of other ‘crypto’ collapses, Vauld previously tried to reassure customers that all was well, tweeting on June 16 that the company had “always maintained a balanced and conservative approach to liquidity management” and that its “fundamentally strong strategies” would see it through this latest crisis. Five days later, Vauld announced it was shedding 30% of its workforce, cutting executive pay in half and ‘pausing’ non-essential vendor deals.
On July 8, Vauld said the moratorium would give management “the breathing space it requires to prepare for the intended restructuring for the benefit of all stakeholders.” The company said it “continues to have discussions” with fellow lending platform Nexo Inc, which signed a term sheet earlier this month giving Nexo 60-days in which to conduct due diligence before deciding whether or not to pull Vauld’s ass out of the ‘crypto’ fire.
Nexo’s interest in acquisitions—the company also made an offer last month to take some of Celsius’s, er, less distressed assets off its hands—appears to have been piqued by its own declining fortunes. The sum of Nexo’s customer deposits has nearly halved in the past two months as ‘crypto winter’ freezes consumer interest in dodgy ventures.
The Peter principle
One year ago, Vauld raised $25 million in a funding round that was ironically characterized as enabling the company to “build crypto wealth globally.” (Ahem.) The round was led by Valar Ventures, with existing investors Pantera Capital, Coinbase Ventures and others also upping their stakes.
Valar also invested in BlockFi, which recently found itself teetering on the brink due to the implosions of 3AC and others before Sam Bankman-Fried’s charitably bottomless checkbook rode to the rescue.
Valar’s founders include one Peter Thiel, the politically polarizing co-founder of PayPal and Palantir Technologies. While Thiel has described himself as a “pro-crypto, pro-Bitcoin maximalist person,” he has also described BTC as “a Chinese financial weapon” against the U.S. dollar, a somewhat contradictory stance for someone who supposedly believes “we’re at the end of the fiat money regime.”
Thiel probably isn’t directly concerned that the greenback will lose its status as the world’s reserve currency, only that the deed might be done by an entity not aligned with his narrowly conservative worldview. Consider Thiel protégé Mark Zuckerberg’s (ultimately unsuccessful) efforts to create an in-house digital currency for use within Facebook, Instagram and WhatsApp. Diem theoretically could have posed a threat to the U.S. dollar’s pre-eminence, at least online, but that would be in keeping with Thiel’s advocacy for corporate power—particularly corporations run by his friends—over government control.
Thiel made his ‘maximalist’ comments in 2021, shortly before BTC’s rapid descent from its $67,000 peak began in earnest. Anyone who took Thiel’s advice to “go long” on BTC following those comments has since lost 2/3 of their investment.
Thiel has made some very good financial bets over the years, although his methods have been called into question. As documented in Max Chafkin’s Thiel bio The Contrarian, Thiel once asked PayPal’s board of directors to give his hedge fund Thiel Capital access to all of the company’s cash, with which he hoped to speculate on—and personally profit from—a fall in interest rates. Saner heads on the board vetoed the proposal.
Thiel also demonstrated a disinterest in PayPal performing ‘know your customer’ (KYC) checks that would have made him a perfect candidate to run Binance. Thiel once told a reporter that he found PayPal rivals’ willingness to comply with such rules to be “insane.”
Thiel has a net worth estimated at around $4 billion, which would allow him to bail out every one of Vauld’s distressed retail customers without doing too much permanent damage to his own future comfort. A far more likely scenario is that Thiel will move on, focused on finding the next dubious project to pry even more hard money out of the credulous ‘crypto’ rubes.
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