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Crypto Crisis: Struggling Crypto Lender About to Be Acquired by Rival

Crypto firm Nexo is reviewing the assets of lender Vauld with the intent of acquiring the struggling crypto financial services company.
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And the great crypto shrinkage continues...

The crypto platform Nexo, which recently made an offer to buy the assets of Celsius Network, stepped up on July 5 to say it signed a term sheet with Vauld to buy the struggling crypto financial services company.

'The Bank Panic of 1907'

The agreement gives Nexo a "60-day exclusive exploratory period" of its intended acquisition of Vauld, pending a due diligence review.

"In a consolidation effort aimed at the betterment of the space, as well as the strengthening of our presence in Southeast Asia, we’ve entered exclusive talks with @VauldOfficial for the full acquisition of the Singapore-based company," Nexo said in a tweet.

Nexo said in a statement that the current market conditions "are to a large degree reminiscent of the Bank Panic of 1907, characterized by excessive leverage in the system, an overabundance of companies in trouble, and no lender of last resort."

"Today, it is again in the hands of a few capable and well-capitalized entities to come up with systemic solutions and aid the sector," the statement said.

Nexo said that "as one of the few companies in a position to help distressed industry participants", it has taken this responsibility with "the utmost seriousness and has retained the advisory services of two major Wall Street banks to receive best-in-class advice on the several acquisitions and liquidity provision options currently underway."

'Customers Are Nervous'

Vauld had warned in a July 4 blogpost that "we are facing financial challenges despite our best efforts."

The company cited "a combination of circumstances," such as the volatile market conditions and the financial difficulties of key business partners.

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Vauld also pointed to the current market climate, which has led to more than $197.7 million in customer withdrawals since June 12 when the decline of the cryptocurrency market was triggered by the collapse of Terraform Lab’s UST stablecoin, Celsius network pausing withdrawals, and Three Arrows Capital defaulting on their loans.

Singapore-based hedge fund Three Arrows Capital (3AC) was forced by a court in the British Virgin Islands to enter liquidation.

The hedge fund paid out its exposure of just over $200 million to the cryptocurrency Luna and its sister UST or TerraUSD, which collapsed in May causing the disappearance of at least $55 billion.

"I understand that a lot of our customers are nervous about your funds. We are working tirelessly to ensure your financials are protected. To that end, we've signed an indicative term sheet with @Nexo to acquire up to 100% of Vauld," CEO Darshan Bathija said in a tweet.

'Long Term Value'

Bathija said in a follow-up tweet that "the completion of this transaction is pending due diligence - which both teams are working on as we speak." 

"Vauld has strived to deliver long term value to all customers, and we believe coming under the @Nexo umbrella will significantly help achieve this," he said.

The Singapore-based Vauld, which is backed Coinbase Global  (COIN) - Get Coinbase Global Inc Report and billionaire Peter Thiel, laid off 30% of its staff last month and looked to slash executive compensation by 50% and cut marketing costs.

Vauld joins an ever-growing list of crypto companies that are cutting staff, including Coinbase, Bybit, Crypto.com, BitOasis, Robinhood, Bitso, Gemin, BlockFi and BitMex.

These losses have caused liquidity problems for several crypto lenders, which means that some of them will find it difficult to meet their margin calls

Nexo stepped in when Celsius announced on June 12 that it would suspend indefinitely various transactions, including withdrawals of funds "due to extreme market conditions."