Crypto Exchange Zipmex Granted 3-Month Protection from Singapore Court against Creditors

Zipmex, Asia’s leading digital asset exchange, said it has won creditor protection from the Singapore High Court for more than three months, gaining time to address liquidity issues.

ZipmexX suspended cryptocurrency withdrawals on July 21, citing the possibility that the exchange’s assets could be swallowed up by the financial crisis facing Celsius Network and cryptocurrency lender Babel Finance.

Some cryptocurrencies such as Solana (SOL), Ripple’s XRP, and Cardano’s ADA have since resumed withdrawals from Zipmex’s trading wallets. But mainstream coins, including Bitcoin and Ether, are still locked.

The company filed five moratorium applications on July 27, seeking creditor protection for six months, giving it time to restructure its debt.

According to Bloomberg, the Singapore High Court has ordered five Zipmex companies to each have a debt moratorium until Dec. 2, during which the company will be immune from the risk of a creditor lawsuit.

The court’s latest legal action allows them a three-month extension to stop their creditors from starting or continuing any legal proceedings.

The judge believed that the company needed to negotiate with the creditor committee and hold a meeting of creditors.

Lenders are currently conducting due diligence during the exploratory period while court proceedings are taking place in the background.

Zipmex, which operates in Singapore, Thailand, Indonesia and Australia, has been in court for six months of bankruptcy protection to explore its restructuring options.

The Thailand-based cryptocurrency exchange is not the first cryptocurrency company to suspend trading in Singapore.

In August, the Singapore High Court granted troubled cryptocurrency lender Vauld a three-month extension as it continues to explore how to repay its creditors.

Vault has been applying to the court for a six-month moratorium to prepare for the company’s restructuring and possible acquisition by Nexo.

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Crypto Lender Vauld Granted 3-Month Protection from Singapore Court against Creditors

Singapore High Court has granted distressed crypto lending firm Vauld a three-month moratorium to continue exploring options on how it can repay its creditors.

The latest legal action from the court allows them to enjoy a three-month moratorium that stops its creditors from starting or continuing any legal proceedings. Vauld now has bought some time until Nov 7 to explore its options. Meanwhile, the court has asked Vauld’s creditors to form a committee.

Following demand letters from some creditors, the judge has given the deadline for Vauld to explore mechanisms for withdrawal for creditors in need.

The crypto lending company owes more than $400 million to its creditors, 90% of which came from individual retail investor deposits.

The lender is currently in the process of due diligence in an exploratory period while the court proceedings take place in the background.

All the creditors will receive updated financial details on the Peter Thiel-backed cryptocurrency lender in another eight weeks, the court stated on Monday in a virtual hearing.

The three-month extension means discontented creditors of Vauld cannot begin or continue any legal proceedings against the firm while it explores its restructuring options.

Vauld’s operations remain halted while its client funds are locked until the firm reaches a restructuring deal, including its potential acquisition by rival London-based crypto lender Nexo.

Vauld had been seeking a six-month moratorium period from the court to prepare for the intended restructuring of the firm and possible acquisition by Nexo.

What Went Wrong with Crypto Lending Firms

On July 5, Singapore-based crypto lender Vauld suspended all withdrawals, trading, and deposits on its platform – an unfortunate incident triggered by the downturn in crypto markets.

Therefore, the firm announced plans to explore potential restructuring options to navigate the challenges it experiences.

A few days later, on July 8, Vauld filed for bankruptcy protection in a Singapore court to give itself “the breathing space” required to prepare for its planned restructure.

It is the latest company to get caught up in the current chaos gripping the crypto world. The recent market crash adversely impacted the operations of several lending firms, including Vauld, Three Arrows Capital, Celsius Network, Voyager Digital, and BlockFi, among others.

The problematic situations have forced some companies to file for bankruptcy while others are looking for emergency capital infusions.

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Vauld Suspends Withdrawals, Exploring Restructuring amid Market Downturn

Vauld, a crypto lending and exchange firm headquartered in Singapore, announced on Monday that it has suspended withdrawals, trading, and deposits on its platform, citing the current “financial challenges”.

Vauld admitted that it is witnessing financial woes amid the ongoing market downturn, which it said prompted customers to withdraw about $198 million since June 12.

Darshan Bathija, the founder and CEO of Vauld, said that the company is exploring restructuring options and so far, has engaged Kroll, a New York-based corporate investigation and risk consulting firm, for financial advisory services, and has hired Cyril Amarchand Mangaldas and Rajah & Tann Singapore LLP as legal advisors in India and Singapore respectively.

“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,” said Bathijaand, adding that the firm will make specific arrangements for certain clients who need to meet their margin calls.

Vauld is a three-year-old crypto lending startup, which counts Peter Thiel-backed Valar Ventures, Coinbase Ventures, and Pantera Capital among its key backers. According to July last year, Vauld had raised a total of $27 million, from investors such as Peter Thiel’s Valar Ventures, Coinbase, Pantera Capital, and Cadenza Capital.

Vauld has been offering lending services and serving as an exchange. The platform enables clients to earn what it describes as the “industry’s highest interest rates on major cryptocurrencies.” On its website, Vauld claims to offer 12.68% annual yields on staking several stablecoins, including USDC and BUSD and 6.7% on Bitcoin and Ethereum tokens. The platform allows customers to borrow against their tokens and facilitates many other trading services.

Crisis in Crypto Lending Landscape

The announcement regarding Vauld’s suspension of customer withdrawals and trading comes after the lender laid off its employees by 30% one week ago.

The job cut came as a surprise. On June 16, Bathija assured Vauld customers that the platform had no exposure to prominent lending platform Celsius Network and high-profile crypto hedge fund firms Three Arrows Capital.

In recent weeks, crypto veterans, including Binance CEO Changpeng Zhao, have warned that many more DeFi platforms are in danger of collapsing amid the current market crash.

On 13th June, Crypto lending platform Celsius Network paused all withdrawals and transfers for customers as the firm faced insolvency and bankruptcy fears. Last Friday, Three Arrows Capital filed for Chapter 15 bankruptcy in New York after weeks of speculation that it was insolvent.

In addition, another major crypto lending platform, Maple Finance, recently halted customer withdrawals after facing liquidity-related issues.

Digital assets lending firm Genesis Trading is reportedly facing losses in the hundreds of millions after the company had significant exposure to financial woes facing Three Arrows Capital and crypto lending platform Babel Finance. BlockFi also experienced substantial losses related to its exposure to Three Arrows Capital.

Such lending firms normally collect crypto deposits from retail customers and invest them in the equivalent of the wholesale crypto market, including “decentralized finance (DeFi) sites that use blockchain technology to offer services such as loans, insurance, among others outside the traditional financial sector.

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