Vauld Platform Withdrawals Paused

Notice: This page is a new case study and some aspects have not been fully researched. Some sections may be incomplete or reflect inaccuracies present in initial sources. Please check the References at the bottom for further information and perform your own additional assessment. Please feel free to contribute by adding any missing information or sources you come across. If you are new here, please read General Tutorial on Wikis or Anatomy of a Case Study for help getting started.

Vauld

Vauld was a trading and lending platform established in 2018 or 2019. Multiple cryptocurrency users chose to trust the platform Vauld with their funds, which promised really high interest rates and continual assurances that everything was safe, all the way leading up to their July 4th announcement that withdrawals were suspended.

The Vauld platform is currently undergoing an acquisition by Nexo, details of which are not provided.

The total amount of the loss to customers is unknown, however details provided that there was a "bank run" of at least $197.7m. Customers have, as of yet, been unable to receive any funds from the platform.

About Vauld

Subreddit:

Vauld is a platform which offers the ability to earn interest on cryptocurrency stored on their platform.

"Build Wealth Automatically With Crypto. Earn. Borrow. Trade. GET STARTED NOW."

According to CoinMarketCap, Vauld was founded in 2019.

"Founded in 2019, Vauld (previously known as Bank of Hodlers) is a Singapore headquartered crypto lending and trading platform. It enables customers to buy, lend, borrow and trade crypto assets from one unified platform and is backed by Peter Theil’s Valar Ventures, Coinbase Ventures, Pantera Capital, and other major names in the industry."

"Vauld enables customers to earn what it claims to be the “industry’s highest interest rates on major cryptocurrencies.” On its website, it says it offers 12.68% annual yields on staking several so-called stablecoins, including USDC and BUSD and 6.7% on Bitcoin and Ethereum tokens. The platform allowed customers to borrow against their tokens and also facilitated several other trading services."

"Incorporated in 2018, Vauld is a crypto lending platform, which encourages long-term investing by offering SIP options and higher interest on crypto holdings to its users. More than 275 coins are listed on its platform." "With users in over 50 countries, Vauld makes it easier than ever to bank on the blockchain through a diverse spectrum of financial products and advanced trading features in addition to offering among the highest yields in the industry."

"It’s unclear how many users Vauld serves." "Majority of the Vauld users were Indian, who accounted for 20 per cent of the AUM & contributed $10-15 million daily volume on the platform. However, the company claimed that the majority of its users hailed from the US." "The number 1 problem in crypto is - lack of information. We're here to solve this."

"Earn the industry’s highest interest rates on major cryptocurrencies." "Opt-in to fixed deposits to earn higher interest rates. Opt-out with zero penalties." "Interest is calculated daily, and paid out weekly on all your tokens." "Withdraw any amount at any time while you earn interest." "Interest earned is compounded every week or at the end of the fixed deposit term."

"Vauld offers multiple layers of security, including MFA and the option of Safelisting, which limits token withdrawals to addresses that you designate as safe. Vauld’s cold wallets are secured using BitGo." "The funds allocated for lending is lent out to borrowers (with a float maintained for withdrawals on the platform). This lets us give interest to our users. The loans to our borrowers are risk free. They are overcollateralised by at least 150%, and are typically repaid in 30 days."

"We have always maintained a balanced and conservative approach to liquidity management. Bull and bear runs are inevitable, and we deploy fundamentally strong strategies that account for these cycles." "Our core goal is to give a delightful experience to our customers, and our business, product and tech goals are aligned accordingly. We take the time to listen to them, incorporate their feedback. and resolve their problems as quickly as possible. We take customer satisfaction very seriously."

"The company earned very little or no brokerage income but instead generated large sums of interest income by lending crypto to other projects for arbitrage. This is as good as banks lending money to others." "However, it could not save itself from macroeconomic downtrends including the crypto winter, Luna collapse, Celcius sage and bankruptcy of Three Arrows Capital. This led to panic among the users, who started to withdraw their funds from various exchanges."

"In an earlier attempt for survival, the company laid off 30 per cent of its staff in June, slashed its marketing budget and trimmed its executive compensation. Though, nothing could come to save a day for Vauld." "Ultimately, new tax rules and overall pessimism in the crypto market were a final nail in the coffin for Vauld, which saw liquidation worth more than $200 million in less than a month."

"Singapore-based lending platform Vauld [was] the latest to prohibit customers from withdrawing funds after suffering a US$200mln bank run since June 12." "Vauld founder and chief executive Darshan Bathija said the startup is exploring restructuring options and has engaged with Kroll for financial advice and Cyril Amarchand Mangaldas and Rajah & Tann for legal advice in India and Singapore, respectively."

This is a global/international case not involving a specific country.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

Over-Collateralized Crypto Loans

"Vauld did specifically say on their website that crypto loans were over-collateralized by at least 150%. The website still even shows this. This was clearly false and I think one could make the valid argument that this falls under "dishonest acts by employees and executives". They did also sent out that e-mail before halting withdrawals that misrepresented their financial position."

User /u/redditsoffiicalbotmod reports "Based on them, their CEO directly, lying I put funds in... If they were stopping withdrawals before the shut down then they knew they were lying and should've stop my deposits being made as they knew they were about to pull the plug and essentially steal my money."

User /u/brianemurray reports "They told me that the internal review would take up to 48 hours because it was over 200k. Vauld website states this as well for large account holders. Cool all is fine but the problem was 7 days later they still never released my funds and then shut down the platform." "[M]y request was way before the platform shut down or there was even an issue. They purposely held my funds and others to keep a cash stash."

Misleading Insurance Promotions

"I have hired an attorney and they have requested the insurance policy from Bitgo. Bitgo has refused to comply with the request." "Bitgo refused to send us a copy of the insurance policy. My attorney said the only way to get the policy now is to SUE Bitgo and file against them."

Early Assurance From Vauld Official

Vauld Finance started to seal their fate by informing the public that they continue "to operate as usual" and publishing a blog post to highlight for investors that there was no need for worry.

We understand that these are trying times for crypto investors, but Vauld continues to operate as usual despite volatile market conditions.

We have always maintained a balanced and conservative approach to liquidity management. Bull and bear runs are inevitable in the crypto market, and we deploy fundamentally strong strategies that account for these cycles.

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.

We believe that such difficult market conditions will eventually give rise to a new wave of innovation and growth, and we are laser-focused on putting our heads down and building for that future.

We remain committed to enabling you to build wealth.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Vauld Platform Withdrawals Paused

Date	Event	Description
July 31st, 2021 6:20:02 AM MDT	Vauld Subreddit Set Up	The Vauld Finance subreddit is first set up by the community.
June 16th, 2022 1:03:00 AM MDT	Vauld Continuing To Operate As Usual	Vauld publishes a tweet to inform everyone that they continue to operate as normal, and invites users to visit their blog to read just how normal they are operating as. "We have always maintained a balanced and conservative approach to liquidity management. Bull and bear runs are inevitable, and we deploy fundamentally strong strategies that account for these cycles."
July 3rd, 2022 10:33:50 PM MDT	Vauld Notice Published	Vauld publishes their Corporate statement highlighting the financial challenges they are facing.
July 4th, 2022 1:19:00 AM MDT	TechCrunch Article	TechCrunch published an article on the situation. TBD Need to include information from this article.
July 4th, 2022 1:27:00 AM MDT	Vauld Suspends Withdrawals	Vauld Finance posts on Twitter to notify that they have made the difficult decision to suspend withdrawals.
July 4th, 2022 2:23:00 AM MDT	Binance CZ Responds	Binance published a Tweet with a commentary on the situation.
July 4th, 2022 5:39:39 AM MDT	CNBC Article	CNBC publishes an article on Vauld Finance pausing withdrawals.
July 7th, 2022 7:53:00 AM MDT	The Economic Times Article	The Economic Times of India publishes an article looking into what went wrong with the Vauld Finance lending platform.
July 8th, 2022	Moratorium Application Filed	The Vauld platform (through their legal counsel) filed an order requesting a moratorium for a period of 6 months.
July 11th, 2022	Vauld Update Published	Vauld publishes an update to their situation on their website. They mention the moratorium order and continued discussions with the Nexo platform.
July 15th, 2022 4:30:10 AM MDT	YouTube Short on Vauld Finance	A short high level video is published. TBD.
August 12th, 2022 7:27:00 AM MDT	Indian Seizes Funds From Vauld	TechCrunch reports that the government of India has seized $46m USD worth of assets from the Vauld platform.
August 13th, 2022	Freezing Order	Vauld reports that they have received an order to freeze all assets in the company's pool wallets.
August 22nd, 2022 1:00:10 AM MDT	Court Verdict Video Published	A video on the court's verdict is published to YouTube by "A Junior VC". TBD more details.
October 7th, 2022 11:05:19 AM MDT	BitGo Insurance Speculation Discussion	Reddit user Brian E Murray is trying to get approval for a lawsuit against BitGo as an insurer of the platform. "The crazy thing is that Bitgo refused to send us a copy of the insurance policy. My attorney said the only way to get the policy now is to SUE Bitgo and file against them."
October 16th, 2022 1:00:08 AM MDT	CryptoKwam Video Posted	The incident is featured in a CryptoKwam video on YouTube as an argument for holding your own private keys.
October 19th, 2022 6:59:18 AM MDT	Reddit Discussion On Order Expiry	According to a Reddit post, the protection order expires on November 7th. TBD Need to expand with more details.
October 28th, 2022 4:03:05 AM MDT	The MetaRoy Podcast YouTube Video	TBD need to review video.
February 27th, 2023 8:21:00 AM MST	Further Extension For Restructuring Plan	As reported by CoinDesk, Vauld was able to obtain an extension to their restructuring plan until March 24th. "The moratorium has been extended till 24-Mar-2023," a Vauld spokesperson told CoinDesk via email. "There will be another hearing scheduled before that to confirm the final decision about approval of scheme."

Technical Details

TBD

Total Amount Lost

The Vauld platform reported that they had experienced "customer withdrawals in excess of a $197.7 m since 12 June 2022".

The total amount at risk has been estimated at $197,700,000 USD. The total amount lost has been estimated at $197,700,000+ USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

Vauld initially published a series of notices on their website about the financial challenges which they were facing and their course of attempting to be acquired by Nexo.

Vauld Publishes Notice On Twitter

The Vauld Twitter account shared an update of their situation, including the suspension of withdrawals.

We've strived to be an excellent crypto lending platform. This has been our goal from day one. We’re committed to finding the best resolution for our customers.

We are facing challenges despite our best efforts. 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.

This has resulted in significant customer withdrawals in excess of $197.7 million since June 12, 2022 when the decline of the cryptocurrency market was triggered by the collapse of Terraform Lab’s UST stablecoin, Celsius Network pausing withdrawals, and 3AC defaulting on loans.

We have considered that it would be in the best interests of stakeholders to take immediate action in the circumstances.

In furtherance of this, we have engaged the services of our financial and legal advisors in India and Singapore respectively.

Our management remains fully committed to working with our financial and legal advisors to the best of our abilities to explore and analyse all possible options, including potential restructuring options, that would best protect the interests of Vauld’s stakeholders.

We intend to apply to the Singapore courts for a moratorium i.e. a suspension of the commencement or continuation of any proceedings against the relevant companies so as to give us breathing space to carry out the proposed restructuring exercise.

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 stakeholders

In the meantime, we have made the difficult decision to suspend all withdrawals, trading and deposits on the Vauld platform with immediate effect.

We believe that this will help to facilitate our exploration of the suitability of potential restructuring options, together with our financial and legal advisors.

Specific arrangements will be made for customer deposits as may be necessary for certain customers to meet margin calls.

Further updates on material developments will be provided at the appropriate juncture. We seek your understanding and patience in the meantime. Should you have any queries, please submit them at enquiries@vauld.com. We will endeavour to address them as soon as practicable.

To know more, check our blog

Vauld Publishes Notice On Website

The Vauld website was updated to publish a notice on July 4th, 2022.

The Vauld management wishes to inform that we are facing financial challenges despite our best efforts. 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 which has led to a significant amount of customer withdrawals in excess of a $197.7 m since 12 June 2022 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.

As such, we have considered that it would be in the best interests of stakeholders to take immediate action in the circumstances. In furtherance of this, we have engaged the services of Kroll Pte Limited as our financial advisor, as well as Cyril Amarchand Mangaldas and Rajah & Tann Singapore LLP as our legal advisors in India and Singapore respectively.

Our management remains fully committed to working with our financial and legal advisors to the best of our abilities to explore and analyse all possible options, including potential restructuring options, that would best protect the interests of Vauld’s stakeholders.

We are currently in discussions with potential investors into the Vauld group of companies. We intend to apply to the Singapore courts for a moratorium i.e. a suspension of the commencement or continuation of any proceedings against the relevant companies so as to give us breathing space to carry out the proposed restructuring exercise.   

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.

In the meantime, we have made the difficult decision to suspend all withdrawals, trading and deposits on the Vauld platform with immediate effect. We believe that this will help to facilitate our exploration of the suitability of potential restructuring options, together with our financial and legal advisors. 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.

Further updates on material developments will be provided at the appropriate juncture. We seek your understanding and patience in the meantime.

Community Reactions

Prosperity Fund responded to Vauld's June update to demand their funds.

I have been waiting 3 days for trades to either complete or release my funds - if not done so we will sue Vauld in court in Singapore India and the usa - fix this now

Binance CEO Commentary

CZ from Binance provided commentary on the collapse.

Unpopular opinion: careful when using platforms that require VC funding, they often don't have a real business model yet. (over generalization, there are exceptions of course)

Vauld Published Update On Website

The Vauld platform published an update on July 11th, 2022.

On 8 July 2022, our counsel in Singapore, Rajah & Tann Singapore LLP, have filed an application in the Singapore Courts on behalf of Defi Payments Pte. Ltd. (“Defi Payments”) to seek a moratorium order under section 64 of the Insolvency, Restructuring and Dissolution Act 2018 to prohibit for the period of 6 months, amongst others, any order or resolution to wind up Defi Payments, and any commencement or continuation of any proceedings against Defi Payments (the “Application”).

The management has decided that, in light of the current circumstances, it would be in the best interests of all stakeholders (including creditors) to file the Application for a moratorium order in favour of Defi Payments. This is so as to give Defi Payments and the Vauld management the breathing space it requires to prepare for the intended restructuring for the benefit of all stakeholders. At this time, the Vauld Group continues to have discussions with Nexo Inc whilst Nexo Inc carries out is due diligence, and also explore potential restructuring options that would best protect the interests of the Vauld Group’s stakeholders.

We will provide further updates after the Court has fixed a hearing for the Application.

Further updates on material developments will also be provided as and when appropriate. We thank our customers and business partners for their continued patience and support whilst we embark on our journey towards a successful rehabilitation of Defi Payments.

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

"London-based crypto lending firm, Nexo, is set to acquire fellow lender and crypto exchange Vauld and has signed a term sheet for buying 100 per cent stake in the latter one. Nexo aims to use the acquisition to accelerate its presence in Asia. Vauld has 60 days of exclusive talks to explore an all-equity acquisition of the company." "Market experts gave the acquisition by Nexo a thumbs up, seeing it as a relief for the investors. However, such processes consume enough time, requiring thorough due diligence and current financial status of the company." "Sharat Chandra, VP- Research & Strategy, EarthID said that the acquisition of Vauld by Nexo should comfort investors but will have to wait until the acquisition process is complete and normalcy returns to the platform."

"Our management remains fully committed to working with our financial and legal advisors to the best of our abilities to explore and analyse all possible options, including potential restructuring options, that would best protect the interests of Vauld’s stakeholders." "We've strived to be an excellent crypto lending platform. This has been our goal from day one. We’re committed to finding the best resolution for our customers."

Pool Wallet Freezing Order

Vauld reports that they received an order to freeze assets in their wallet.

We, like several other players offering crypto services in India, had received summons from the Enforcement Directorate, Hyderabad, India in the month of July 2022, seeking certain information/documents. In due compliance with the summons, we fully cooperated with the Enforcement Directorate and provided all the required information/documents.

It is unfortunate that, despite extending our cooperation, the Enforcement Directorate has proceeded to pass a freezing order, pursuant to which crypto assets in the pool wallets of the company have ordered to been frozen to the extent of approximately INR 2040 million. The freezing order of the Enforcement Directorate is specific to that one customer that availed our services for a brief period of time, whose account we subsequently deactivated. We respectfully disagree with the freezing order.

We follow strict KYC requirements in every country, including India. We are seeking legal advice on our best course of action in order to protect the interests of the company, its customers, and all the stakeholders. We have fully cooperated with the Enforcement Directorate and will continue to extend our cooperation to ensure we continue to remain a safe place for customers to transact and own cryptocurrencies.

Attempts To Get BitGo Insurance Policy

Reddit user Brian E Murray reports that he attempted to contact BitGo to receive the insurance policy and was unable to.

I just want to throw this out to the community. I have 7 figures locked up on Vauld. I tried to withdraw my USDC funds over 9 days before the platform shut down and Vauld wouldn't release my funds due to internal review. I was able to get all of my Bitcoin off. I have hired an attorney and they have requested the insurance policy from Bitgo. Bitgo has refused to comply with the request. On Vauld's website they stated that all loans were secured by at least 150% collateral. We were also emailed telling us that Vauld had no exposure to 3 arrows capital. On Vauld's website it says that Bitgo covers customers from the following.

Total Amount Recovered

There do not appear to have been any funds recovered in this case.

Ongoing Developments

What parts of this case are still remaining to be concluded?

Individual Prevention Policies

When using any third party custodial platform (such as for trading), it is important to verify that the platform has a full backing of all assets, and that assets have been secured in a proper multi-signature wallet held by several trusted and trained individuals. If this can't be validated, then users should avoid using that platform. Unfortunately, most centralized platforms today still do not provide the level of transparency and third party validation which would be necessary to ensure that assets have been kept secure and properly backed. Therefore, the most effective strategy at present remains to learn proper self custody practices and avoid using any third party custodial platforms whenever possible.

Store the majority of funds offline. By offline, it means that the private key and/or seed phrase is exclusively held by you and not connected to any networked device. Examples of offline storage include paper wallets (seed phrase or key written down and deleted from all electronic media), hardware wallets, steel wallet devices, etc...

Any time that you are promised any profit or benefit in exchange for an initial payment, smart contract approval, or deposit, pay special care as to whether the entity making that offer is trustworthy, actually who they say they are, and has the means to fulfill what they're promising. There are no magic algorithms providing guaranteed returns from trading or mining. Trading on average will lose money. Mining is expensive and complex. No one is going to immediately send back more than you sent them. NFT projects will rarely announce a surprise mint in only a single location. Are you fully prepared for the event your money is kept and nothing is delivered in return?

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Do not take customer assets and performing highly risky trades and investments without giving visibility to customers.

All wallets, minting functions, and critical infrastructure should be implemented with a multi-signature requirement, with a recommended minimum of 3 signatures required. This means that making important changes or approving spending will require the keys held by at least 3 separate individuals within the organization to approve. The multi-signature should be implemented at the lowest layer possible, all key holders should have security training, and all key holders should be empowered and encouraged to exercise diligence.

All aspects of any platform should undergo a regular validation/inspection by experts. This validation should include a security audit of any smart contracts, reporting any risks to the backing (of any customer assets, ensuring treasuries or minting functions are properly secured under the control of a multi-signature wallet, and finding any inadequacies in the level of training or integrity of the team. The recommended interval is twice prior to launch or significant system upgrade, once after 3 months, and every 6 months thereafter. It is recommended that the third party performing the inspection not be repeated within a 14 month period.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

Create a standard tutorial and quiz for all new cryptocurrency participants, which is required to be completed once per participant. This tutorial and quiz should cover the basics of proper seed phrase protection, strong password generation, secure two-factor authentication, common fraud schemes, how to detect and guard against phishing attacks, how ponzi schemes work, as well as other risks which are unique to the cryptocurrency space.

The primary problem happened due to the failure to back customer assets. All assets including those traded were affected, and there was no visibility into the way that funds were backed or the level of risk being taken. Lending products fundamentally depend on the lender being paid back, which is difficult to ensure. Users deserve transparency into the level of risk being taken on, which is best provided by multiple independent third parties.

All platforms should undergo published security and risk assessments by independent third parties. Two assessments are required at founding or major upgrade, one after 3 months, and one every 6 months thereafter. The third parties must not repeat within the past 14 months. A risk assessment needs to include what assets back customer deposits and the risk of default from any third parties being lent to. The security assessment must include ensuring a proper multi-signature wallet, and that all signatories are properly trained. Assessments must be performed on social media, databases, and DNS security.

Set up a multi-signature wallet with private keys held separately by delegate signatories from seven prominent platforms and services within the industry. Establish requirements for contributions by all platforms and services within the country, designed to be affordable for small platforms yet large enough to cover anticipated breach events. Any breach event can be brought forth by a member platform or a petition of 100 signatures for consideration by the delegate signatories. A vote of 4 or more delegate signatures is required to release any funds, which could partially or fully restore lost funds based on their assessment.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.