Creditor Protection: Troubled Crypto Lender Gets Additional Time
Crypto lending is one of the most exciting and innovative developments in today’s financial markets. However, as with any burgeoning enterprise, there are constant threats concerned.
Hence, the crypto community was surprised when troubled crypto lender Vauld received additional creditor protection. A Singapore court has provided Vauld, a struggling crypto lending service, with an additional period of creditor protection.
However, the court asks that the firm submit a recovery plan before the end of February. According to Bloomberg’s report on Tuesday, Vauld was allowed more than four weeks to finish talks with digital asset fund managers.
The Singapore High Court was satisfied with the company’s assertion that negotiations had progressed to an ‘Advanced’ level. In July 2022, the platform stopped allowing its 800,000 customers to withdraw funds owing to adverse market circumstances and unprecedented $200 million withdrawals within two weeks.
By August 2022, it had already received a three-month respite from the court to design a restructuring strategy for the business and grant a better result for its creditors. The court then declined the company’s plea for a six-month shielding period, expressing apprehensions that a more extended respite “would not get proper oversight and tracking.”
At the start of the initial moratorium, Nexo, a crypto lender based in Switzerland, had declared its intent to take over Vauld with its total assets. But after law enforcement officers conducted a raid of Nexo’s office in Bulgaria, Vauld dismissed any chance of the deal’s manifestation.
Singapore authorities have previously expressed their willingness to provide a chance for crypto companies in difficulty to rectify their problems. For example, in August 2022, a leading Singapore-based crypto platform, Zipmex, was given a three-month extension to address liquidity issues.
These recent events have made Singapore’s central bank suggest prohibiting digital payment token providers from providing any credit, either in fiat or cryptocurrency, to their customers.
What Happened To Vauld?
Following the Terra network crash in May 2022, Vauld declared that it had halted all trading, withdrawals, and deposits on its platform. Based on the current market conditions, the business declared that it had recorded a substantial increase in customers taking out their funds.
The crypto ecosystem has received the news of Vauld’s extended creditor protection with optimism and skepticism. On the one hand, many have applauded Vauld’s restructuring efforts and expressed hope that the company will emerge from its current troubles.
On the other hand, some have questioned the wisdom of extending the protection, pointing out that it could delay the company’s return to profitability. In any case, the future of Vauld remains uncertain.
The company has much work to do before it can return to profitability and restore investor confidence. Until then, Vauld will continue to operate under the protection of the courts.
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