Vauld — Another Web 3 Domino Falls
Singapore-based crypto trading platform Vauld has now suspended trading as rumors of insolvency were confirmed this week. The venture-backed startup has raised more than 27 million dollars from Valar Ventures, Pantera, and Coinbase. Red flags began to emerge with the platform when it was forced to cut its staff by 30% two weeks ago. Vauld was reported to have more than 1 Billion in assets under management back in May and is now navigating significant financial challenges as customers have withdrawn close to $200 million from the platform since June. This is the latest Web 3 domino to fall alongside Luna, Celsius, Voyager, and Three Arrows Capital.
It should come as no surprise that Vauld offered the “industry’s highest interest rates on major cryptocurrencies.” Unsustainable yields seem to be a common thread across many crypto trading platforms that have collapsed in recent months. Terra Luna offered close to 20% APY on staked UST via the Anchor protocol and we all saw how that played out. Vauld offered 12.68% annual yields on staked stablecoins and 6.7% returns on staked Bitcoin and Ethereum tokens. Given what we have seen with Terra Luna’s collapse, the high yields from Vauld should have set off alarm bells, yet many users still flocked to the trading platform to find safe harbor during uncertain times.
As markets began to crash over the last few months, many in the crypto space were justifiably concerned about Vauld’s financial solvency. In a blog post on June 16th, Darshan Bathija, CEO of Vauld reassured the Web 3 community that the crypto trading platform was operating as usual.
“We do not have any exposure to Celsius or Three Arrows Capital, and we remain liquid despite market conditions. Over the last few days, all withdrawals were processed as usual and this will continue to be the case in the future.” Darshan Bathija
Bathija’s statements had encouraged many former Celsius and Voyager customers to move their assets to Vauld only to see their assets frozen as the crypto trading platform become insolvent this week.
“We seek the understanding of customers of the Vauld platform that we will not be in a position to process any new or further requests or instructions in this regard. Specific arrangements will be made for customer deposits as may be necessary for certain customers to meet margin calls in connection with collateralised loans,” Darshan Bathija
Vauld is now in talks with London-based crypto trading platform Nexo for a potential bailout. Nexo has plans to buy up 100% of the beleaguered trading platform with an aim to expand deeper into the Asian market. The Nexo bailout is likely the only hope for Vauld customers hoping to see their money again.
Despite the potential bailout from Nexo, one has to wonder if Vauld’s business model was sound to begin with. Unsustainable yields and an inability to contend with market downturns are becoming a recurring theme across many insolvent crypto trading platforms. Moreover, many of these platforms reassured customers that everything was operating as usual right up to the end possibly encouraging people to move money to the platform despite the potential for insolvency in the immediate future. One has to wonder if there will be any level of accountability for industry leaders like Bathija who have actively misled users and destroyed people's financial future along the way.
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