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Nexo buying Vauld? Acquisition may unlock frozen deposits

By Capital.com News

Edited by Lewis Page


Updated

Photo of Nexo logo
Vauld's focus on the Southeast Asian cryptocurrency market appeals to potential buyer Nexo. - Photo: Shutterstock

Vauld’s focus on Southeast Asia is appealing to Nexo as the exchange operator attempts to acquire the distressed cryptocurrency lending and trading company.

London-based Nexo signed an indicative term sheet with Vauld that grants Nexo an exclusive 60-day exploratory period to acquire up to 100% of the company. If all goes as planned, Nexo will reorganize Vauld’s future operations to accelerate its deeper presence in Asia, the woud-be purchaser said in a news release on Tuesday.

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Deal could unlock deposits

A completed acquisition may unlock Vauld customers’ frozen deposits. Vauld froze all deposits, withdrawals and trades on Monday.

“Nexо finds synergies with Vauld’s existing focus on Southeast Asia, an important and continuously growing market for the former’s flagship financial services,” said Nexo in the news release. “While Nexo aims to provide immediate assistance and alleviate withdrawal limitations put in place on Vauld’s platform, greater plans for the future are already in the making.”

As a deal is being finalized, Nexo will “explore the integration of a wider retail and institutional product range.” Nexo said its strong liquidity, legal and regulatory expertise, automation, risk management, and business practices enabled it to withstand “the cascading collapse” of multiple institutions in the crypto sector.

“The aim is not only to protect Vauld’s existing customer base to the fullest extent possible but also to give them access to an improved range of services,” said Nexo in the news release.

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Memories of 1907 Bank Panic

Nexo considers the current market conditions to be largely reminiscent of the 1907 Bank Panic in the US, which was also known as the Knickerbocker Crisis. Now, like then, suggested Nexo, there is excessive leverage in the system – in this case the crypto market instead of conventional finance – an overabundance of companies in trouble and no “lender of last resort.

Nexo regards itself as one of the “few capable and well-capitalized entities” that can come up with “systemic solutions” and assist the sector. The company said that it takes its ability to help distressed industry participants “with the utmost seriousness” and has seriously and has retained the services of two unidentified Wall Street banks for advice on “several acquisitions and liquidity provision options currently underway.”

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Company expresses sympathy

“We sympathize with all affected by the drastic market downturn,” said Tatiana Metodieva, Nexo’s head of corporate finance and investments, in the news release.

“However, difficult times always teach us the importance of business-model viability and prudent risk management.

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“It is inevitable that the industry leaders will navigate out of the current crisis on the foundation of competitive strength, discipline, and uncompromising responsibility to customers.”

Vauld is among several companies, including market leader bitcoin, that are grappling with the crypto winter that has resulted in severe financial losses.

 

Firm made ‘bad’ decisions

But Nexo co-founder Antoni Trenchev told Bloomberg that Vauld’s distress is also due to the company’s own mistakes.

“It was built out correctly, unfortunately [it] turns out they made some bad investment decisions,” said Trenchev. “But the company as such is interesting as it has a lot of traction in India and Southeast Asia,”

He declined to elaborate on Vauld’s investment decisions.

'Position of strength'

“Operating under the Nexo umbrella puts us instantly in a position of strength to continue the execution of our fiduciary obligations to our customers and at the same time to execute upon both companies’ ambitious roadmaps, regardless of the market conditions,” Vauld Darshan Bathija said in the news release put out by Nexo.

Bathija said in a blog post Monday that the company has witnessed $197.7m (X) in customer withdrawals since 12 June.

Nexo’s coin (NEXO) was up about 5% in afternoon trading in North America on Wednesday, according to Capital.com data.

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The difference between trading assets and CFDs
The main difference between CFD trading and trading assets, such as commodities and stocks, is that you don’t own the underlying asset when you trade on a CFD.
You can still benefit if the market moves in your favour, or make a loss if it moves against you. However, with traditional trading you enter a contract to exchange the legal ownership of the individual shares or the commodities for money, and you own this until you sell it again.
CFDs are leveraged products, which means that you only need to deposit a percentage of the full value of the CFD trade in order to open a position. But with traditional trading, you buy the assets for the full amount. In the UK, there is no stamp duty on CFD trading, but there is when you buy stocks, for example.
CFDs attract overnight costs to hold the trades (unless you use 1-1 leverage), which makes them more suited to short-term trading opportunities. Stocks and commodities are more normally bought and held for longer. You might also pay a broker commission or fees when buying and selling assets direct and you’d need somewhere to store them safely.
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