Vauld, a crypto lender backed by Coinbase and investor Peter Thiel, has halted withdrawals and trading on its platform as the credit crisis in the digital asset market intensifies.
The company, which offered clients annualised returns of up to 40 per cent to lend out their crypto tokens, said on Monday clients had yanked almost $200mn from its platform in the past three weeks as high-profile failures ricochet through the industry.
It had appointed advisers to look at all potential options, including a restructuring, Vauld said in a statement on Monday.
The Singapore-based group’s decision to suspend redemptions is the latest sign of how a powerful pullback in digital asset prices in recent months has severely caught out what was once a flourishing market for lending digital tokens.
Companies have been hit by the aftershocks of the collapse of digital token luna in May. Last month, lenders BlockFi and Celsius both said they would have to halt withdrawals and hedge fund Three Arrows Capital — one of the market’s biggest investors — failed, ensnaring other parties.
Vauld said on June 16 that it did not have any exposure to Celsius or Three Arrows Capital. “We remain liquid despite market conditions. Over the past few days, all withdrawals were processed as usual and this will continue to be the case in the future,” it said.
But it noted on Monday that Three Arrows’ collapse had been a factor in triggering a stream of client withdrawals.
“We are facing challenges despite our best efforts,” Vauld said on Monday. “This is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us and the current market climate.”
It has hired Kroll as a financial adviser and Cyril Amarchand Mangaldas and Rajah & Tann Singapore as legal advisers as it weighs its options.
Vauld raised $25mn in a funding round a year ago. Among the participants were Coinbase’s venture capital arm, crypto hedge fund Pantera Capital and Valar Ventures, a venture capital company co-founded by Peter Thiel.
The failure of Three Arrows inflicted severe pain across the industry. The group, which fell into liquidation last week, is expected to face claims from a “significant” number of creditors, according to the insolvency specialists tasked with unwinding its business.
Other crypto lenders were more directly exposed, with Voyager Digital claiming Three Arrows failed to make good on $650mn in loans. BlockFi also said it had sustained losses of $80mn tied to Three Arrows.
Late on Friday, Voyager also halted withdrawals, while rival BlockFi said on the same day that it had reached a deal under which trading platform FTX would provide it with fresh financing in exchange for an option to purchase the crypto lender.
The crash in May of the crypto token luna and its stablecoin counterpart terra — which had been among the most popular assets used in highly risky crypto bets known as “staking” — has intensified the pressure on the sector.