Crypto Lender Nexo Throws Out A Lifeline To Troubled Crypto Lender Vauld

Published on

Troubled crypto lender Vauld, which is backed by well-known venture capitalist Peter Thiel and crypto exchange Coinbase, suspended withdrawals over the weekend, citing the widespread digital asset crisis. Now competing crypto lender Nexo says it signed a term sheet with Vauld that gives it 60 days of exclusive negotiations to discuss an all-equity acquisition of the smaller lender.

What Happened To Vauld?

On Monday, Vauld paused operations, saying it was looking into restructuring options due to the “financial challenges” it faced in relation to the sharp selloff in cryptocurrencies. The company had previously offered annualized returns of up to 40% to its clients when they loaned out their cryptocurrency.

Get The Full Ray Dalio Series in PDF

Get the entire 10-part series on Ray Dalio in PDF. Save it to your desktop, read it on your tablet, or email to your colleagues

Q1 2022 hedge fund letters, conferences and more

On Monday, Vauld said its clients had pulled almost $200 million from its platform. Between those withdrawals and the widespread problems in the crypto markets, including several company failures, Vauld said it was considering several options.

The Singapore-based firm also said it faces multiple "challenges," which include a combination of "volatile market conditions," "financial difficulties" of its key business partners, and "the current market climate."

Other Crypto Firms Also Affected By The Selloff

Bitcoin, the most well-known and largest cryptocurrency by market cap, fell under $20,000 on Friday and has yet to cover. June was the cryptocurrency's worst month ever, as it lost over 38% of its value. Bitcoin is down by more than 50% since the beginning of the year.

Due to the sweeping selloff in the crypto market, several crypto-exposed firms have failed since the Luna stablecoin broke its peg in May. Within the last month, another crypto lending firm, Celsius, paused withdrawals indefinitely due to "extreme market conditions."

Additionally, Three Arrows Capital, a crypto hedge fund, filed for bankruptcy protection only days after liquidating its assets.

Nexo's Offer For Vauld

CNBC asked Vauld co-founder Antoni Trenchev how much Nexo would pay for Vauld, and he said it was "premature" to talk about valuation at the current stage. However, he also said he was "optimistic" that they would be able to reach a deal.

Nexo's chief told CNBC they were just beginning the due diligence stage. The crypto lender signed a term sheet with Vauld that gives it 60 days of exclusive negotiations with the troubled lender. He added that Vauld is opening up its books during that time and that they will "see everything," including whether there is a "hole" and how big it is. Nexo will also be looking at Vauld's assets and counterparties.

The company has already been looking for expansion opportunities. Nexo sent a letter of intent to Celsius with an offer to buy it, but Nexo said that Celsius refused the offer.