Coin-based Vauld stops withdrawals as the cryptocurrency crisis intensifies

by Arthur · July 4, 2022

Vauld, a cryptocurrency lender backed by Coinbase and investor Peter Thiel, has stopped withdrawing and trading on its platform as the credit crunch in the digital asset market intensifies.

The company, which offered customers an annual return of up to 40 percent to lend their cryptocurrencies, said Monday that clients had withdrawn nearly $ 200 million from their platform in the past three weeks as high-profile bugs moved through the industry.

It had appointed advisers to look at all potential options, including a restructuring, Vauld said in a statement on Monday.

The Singapore-based group’s decision to suspend redemptions is the latest sign of how a sharp pullback in digital asset prices in recent months has caught up with what was once a booming market for lending digital tokens.

Companies have been hit by the aftershocks following the collapse of the digital token luna in May. Last month, lenders BlockFi and Celsius both said they would have to stop withdrawing and the hedge fund Three Arrows Capital – one of the market’s largest investors – failed, capturing other parties.

Vauld said on June 16 that they had no exposure to Celsius or Three Arrows Capital. “We remain liquid despite market conditions. During the last few days, all withdrawals were treated as usual, and this will continue to be the case in the future, it is said.

But it noted on Monday that the collapse of the Three Arrows had been a factor that triggered a stream of client withdrawals.

“We face challenges despite our best efforts,” Vauld said Monday. “This is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners that inevitably affect us and the current market climate.”

It has hired Kroll as financial advisor and Cyril Amarchand Mangaldas and Rajah & Tann Singapore as legal advisors while weighing their options.

Vauld raised $ 25 million in a funding round a year ago. Among the participants were Coinbase’s venture capital alarm, crypto hedge fund Pantera Capital and Valar Ventures, a venture capital company co-founded by Peter Thiel.

The error with Three Arrows caused severe pain throughout the industry. The group, which fell into liquidation last week, is expected to meet claims from a “significant” number of creditors, according to the insolvency specialists tasked with winding up the business.

Other cryptocurrencies were more directly exposed, with Voyager Digital claiming that Three Arrows failed to earn $ 650 million in loans. BlockFi also said it had incurred losses of $ 80 million related to the Three Arrows.

Late on Friday, Voyager also stopped withdrawals, while rival BlockFi the same day said that they had reached an agreement where the trading platform FTX would give it new financing in exchange for an option to buy the crypto lender.

The crash in May of the crypto token luna and its stablecoin counterpart terra – which had been among the most popular assets used in very risky crypto games known as “staking” – has intensified the pressure on the sector.