Peter Thiel-backed “crypto” lending platform Vauld bankrupt
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 exuberant.
On July 8, Singapore-registered/India-based Vauld filed an application for a moratorium under Section 64 of Singapore’s Insolvency, Restructuring and Winding-Up Act 2018. The company, which owes $402 million to its creditors – primarily retail customers – is seeking a six-month break on any order or settlement to “wind down [parent company] DeFi Payments, and any commencement or continuation of any action 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 Vauld said panicked customers had withdrawn $197.7 million from the platform since June 12, forcing the lender to “suspend all withdrawals, trading and deposits … with immediate effect.”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 problems. The collapse of Terraform Labs’ UST algorithmic stablecoin, the Celsius network exposed as a Ponzi scheme and digital currency hedge fund Three Arrows Capital (3AC) doing its best Lehman Brothers impression apparently helped sink Vauld’s boat.
In a move reminiscent of other ‘crypto’ collapses, Vauld previously sought to reassure clients 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 would shed 30% of its workforce, cut executive pay in half and “pause” non-essential supplier contracts.
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 to conduct due diligence before deciding to pull Vauld’s ass out of the ‘crypt’. ‘ Fire.
Nexo’s interest in acquisitions – the company also made an offer last month to take some of Celsius’ less distressed assets off its hands – appears to have been piqued by its own declining fortunes. The sum of Nexo’s customer deposits has almost halved in the past two months as the “crypto winter” freezes consumer interest in dubious ventures.
The Peter Principle
A year ago, Vauld raised $25 million in a funding round ironically described 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 on edge due to the implosions of 3AC and others before Sam Bankman-Fried’s charitable bottomless checkbook came 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 one “pro-crypto, pro-Bitcoin maximalist person,” he has also described BTC as “a Chinese financial weapon” against the US dollar, a somewhat contradictory stance for someone who supposedly believes “we are at the end of the fiat money regime.”
Thiel is probably not directly worried that the dollar will lose its status as the world’s reserve currency, just that the deed could be done by an entity that does not align with his narrowly conservative worldview. Consider Thiel protégé Mark Zuckerberg’s (ultimately failed) attempt to create an internal digital currency for use on Facebook, Instagram and WhatsApp. Diem could theoretically have posed a threat to the US dollar’s primacy, at least online, but that would be in line with Thiel’s advocacy of corporate power — especially companies run by his friends — over government control.
Thiel made his “maximalist” comments in 2021, shortly before BTC’s rapid descent from the $67,000 peak began in earnest. Anyone who took Thiel’s advice to “go long” on BTC after these comments has since lost 2/3 of their investment.
Thiel has made some very good financial plays over the years, although his methods have been questioned. As documented in Max Chafkin’s Thiel biography The contrarian, Thiel once asked PayPal’s board to give his hedge fund Thiel Capital access to all of the company’s cash, which he hoped to speculate on—and personally profit from—a drop in interest rates. The saner heads on the board vetoed the proposal.
Thiel also showed 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 the willingness of PayPal rivals to comply with such rules “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 clients 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 cash out of the gullible “crypto” ruts.
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