Is Vauld shutting down? What was the court’s verdict on its moratorium? What does moratorium even mean? What’s the best outcome for you if you’re a customer?

00:00 Introduction

00:24 What is Vauld? How does it make money?
00:55 What really happened at Vauld?
02:08 What did Vauld do?
02:43 What’s a moratorium?
03:13 Court’s verdict
03:43 Impact on the customer
04:07 Plan B

About the host:
Pranav is a Senior Product Manager with GE Healthcare, with a background in consultancy
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First, let’s start by explaining what is Vauld and how does it earn money?

It is a crypto lending platform, which encourages long-term investing in crypto by offering SIP options and high interest on crypto holdings for its customer. They are more like a bank and less a brokerage firm hence they don’t earn via brokerage but by lending your crypto to other projects for arbitrage, keeping a cut from the interest earned and passing some of it to the customers.

Now, what really happened at Vauld since June?

The company wasn’t immune to the macroeconomic events in the crypto world, with the collapse of Luna, Celsius, and Three Arrows Capital, the whole crypto lending process was at risk. At the same time, the new crypto taxation rules in India were implemented. This led to panic among the investors who decided to withdraw close to 200 million dollars in June alone.

What did Vauld do?

In order to stay afloat, the CEO of Vauld, Darshan Bathija on the 4th of July announced that they had suspended all withdrawals, trading, and deposits on the platform in order to buy time to identify potential restructuring options. Of course, such an announcement would cause a massive uproar leading to a ton of lawsuits from customers and investors who are owed money. In order to prevent this, the company filed for something called a moratorium in the Singapore court. Singapore, because that’s where the company is legally established.

Let’s first understand what’s a moratorium

Firstly, it doesn’t mean that the company is shutting down. It simply is a temporary legal measure that prevents any recovery or legal actions against the company, allowing them to focus on sorting out the issues. But the creditors still retain the right and claim over the money they are owed. A similar ringfence was deployed by the Government of India during Covid, allowing you and I to skip EMI and credit card payments without any legal repercussions.

What was the court’s verdict with Vauld?

Vauld allowed all its customers to state if they were in favor of Vauld being granted the moratorium. And over 75% of the customers were in favor of the moratorium, as the other option would most likely mean a bunch of lawsuits without any potentially favorable outcome for any of the parties. Vauld requested for a 6-month moratorium but the court decide to grant it for only 3 months instead, until the 7th of November 2022

But what does it mean for you as a customer?

The most favorable outcome for you as a customer would be for the London-based crypto lending firm Nexo to acquire 100% of the company. The financial due diligence is in progress and in case no discrepancies are found in Vaulds’ books, the deal would go through giving the customers an opportunity to gradually exit

But what if the deal falls out?

Though the company is optimistic, it is making contingency plans which include a combination of:

- Raising more venture capital
- Explore other acquisition avenues
- Issuing their own token
- Converting the debt into stocks, so you would basically own Vauld’s stocks in proportion to the value of your investment
- Manage repayments to customers via future revenue/capital repayment

The company has strived to remain transparent throughout but we’ll know in about 2 months how this will all end. Furthermore, the enforcement directorate has decided to freeze their assets worth 370 Crore in another case. More details are awaited. The situation handling and the final outcome are at a critical juncture as it would set a tone and precedence for trust in this rather unregulated space.

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