Angry creditors file affidavit to block Vauld's third moratorium extension

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Creditors of the troubled crypto lending platform Vauld on February 23, filed an affidavit to bar the firm from filing yet another extension to its moratorium which ended on January 20; signalling increasing distrust around the firm’s ongoing activities to restructure the business and bailout creditors.

Coinbase-backed Vauld is currently trying to get another extension on its moratorium from the Singapore Court.

The new affidavit by creditors was filed with the Singapore Court by Jonathan Jeremy Edelman, authorised by creditors William Doerrfeld, Samuel Burton, Jeffrey Howerbush and Brian Murray. Together, Vauld owes about $2.23 million to these men, according to the affidavit assessed by Moneycontrol.

There’s also a rising distrust among the creditors, of Vauld’s co-founder and CEO Darshan Bathija,  as the affidavit mentions that its parent Defi Payments and Kroll (Defi Payment’s financial advisors) has had seven months and yet failed to “produce a restructuring scheme acceptable to creditors.”

“They have squandered this time chasing avenues that creditors did not wish to pursue (such as speculative and risky external fund management of creditors’ remaining assets), providing limited information to creditors that was either incomplete or inaccurate (such as claiming a liquidation would cost at least $40 million in professional and other fees) and shutting down/censoring creditor communication channels that were set up at the Court’s suggestion,” the affidavit said.

All this had racked up significant professional fees that will ultimately have to be paid for with creditor funds, it said. These creditors are a part of Vauld Creditor’s Alliance, which was formed after “Committee of Creditors” (“COC”) formed by Defi Payments/Kroll in October 2022 was and is failing to properly represent the views and interests of unrepresented creditors,

According to the affidavit, the VCA currently comprises over 250 creditors in number with over $50 million of assets that remain stuck on the Vauld platform.

“We have members from the United States, India, Singapore and Europe such that we represent the interests of creditors from diverse geographies, jurisdictions, and claim sizes.”

The affidavit also highlighted the misrepresentation of Vauld’s lending products as “risk-free” and alleged botched handling of the Nexo deal and misleading presentation of restructuring options to creditors.

The hearing for this case is expected to happen on February 27, Vauld informed its customers in an email seen by Moneycontrol.

In August 2022, two months after operations, withdrawals citing financial troubles, Vauld had proposed and started the CoC to consult on the way forward and provide legal representation to those who didn’t have it.

Vauld was in the process to get acquired by London-based crypto lender Nexo, which was called off in December after Nexo allegedly failed to respond to Vauld’s due diligence queries.

Overall, Vauld has assets worth around $330 million and liabilities worth $400 million. On August 13, ED froze the start-up’s bank balances, payment gateway balances and crypto balances worth Rs 370 crore for allegedly assisting predatory lending apps.

Vauld is backed by popular investors including Coinbase Ventures, PayPal co-founder and billionaire investor Peter Thiel's Valar Ventures, CMT Digital, Gumi Cryptos, Robert Leshner, and Cadenza Capital.