Nexo aquiring troubled crypto lender Vauld.
Launched in 2018, Nexo offers crypto lending and borrowing services to customers including interest accounts and crypto-backed loans. Vauld also supports lending, borrowing and trading on its platform, although that activity is currently on hold.
The crypto lender is the latest of several firms to come into serious trouble in the fallout from Terra’s collapse, Three Arrows Capital’s bankruptcy, and a general decline in crypto asset prices, following the likes of Celsius, Voyager Digital, BlockFi, Babel Finance, CoinFLEX, and CoinLoan. As the market has dropped, crypto lenders have been particularly hard hit as customers rush to withdraw funds in fears of falling victim to insolvency issues. BlockFi announced Friday that it had inked a deal with FTX.US to be acquired for up to $240 million with FTX.US offering an additional $400 million rolling credit facility, while Nexo last month reached out to Celsius for a potential asset buyout after it froze withdrawals (neither firm has yet shared an update on the offer).
Nexo’s press release likened the recent events to the Bank Panic of 1907, citing “excessive leverage in the system” as a primary factor for the market-wide crisis. The firm said that it was “in a position to help distressed industry participants” and revealed that it had hired two top Wall Street institutions to advise on potential acquisitions.
On Monday July 4th, Vauld announced that it had paused customer withdrawals as it admitted it was “facing challenges” amid market volatility. A blog post revealed that customers had withdrawn $197.7 million since Jun. 12, resulting in a liquidity crisis.
Cryptocurrency lender Nexo said on Tuesday it has signed a term sheet with Coinbase-backed digital assets platform Vauld, outlining plans to acquire the troubled firm’s assets and under this agreement it would give Nexo 60 days related to its acquisition.
A term sheet is a document laying out terms and conditions of a potential business agreement. At the end of the exploratory period, both Nexo and Vauld may decide to either finalize a deal or drop it.
“Upon successful completion of the transaction, Nexo plans to acquire up to 100% of Vauld and reorganize its future operations with the aim to accelerate its deeper presence in Asia,” the company said in a statement on Tuesday.
Though the acquisition will only be confirmed if Vauld meets the satisfactory requirements of Nexo’s due diligence checks, Vauld CEO and co-founder commented that he was pleased that his firm had found a potential path forward. “Operating under the Nexo umbrella puts us instantly in a position of strength to continue the execution of our fiduciary obligations to our customers and at the same time to execute upon both companies’ ambitious roadmaps, regardless of the market conditions,” he said.
It also enlisted the help of financial and legal advisors to provide counsel.
In both the statement and on social media, Vauld CEO Darshan Bathija reiterated his intent to protect the interests of Vauld users and stakeholders during this challenging period.
“We are confident that, with the advice of our financial and legal advisors, we will be able to reach a solution that will best protect the interests of Vauld’s customers and stakeholders.”
“Nexо finds synergies with Vauld’s existing focus on Southeast Asia, an important and continuously growing market for the former’s flagship financial services,” Tatiana Metodieva, head of corporate finance & investments at Nexo, said in a statement.
“While Nexo aims to provide immediate assistance and alleviate withdrawal limitations put in place on Vauld’s platform, greater plans for the future are already in the making,” Metodieva added, while also being one of the few crypto companies available to help hurting businesses.
“Operating under the Nexo umbrella puts us instantly in a position of strength to continue the execution of our fiduciary obligations to our customers and at the same time to execute upon both companies’ ambitious roadmaps, regardless of the market conditions,” Vauld CEO Darshan Bathika said.
As the market continues to unfold the under-collaterized loan and lending businesses will show the weaknesses in the DEFI industry especially. Risk is a serious issue that seems to be ignored when coming to this specific area with everyone being tied to one another causing a domino effect when one falls.
