Nexo and Vauld end talks of a potential acquisition

Crypto lender Nexo, which was in talks with troubled crypto lender Vauld to acquire it, has terminated the discussions of a potential deal. The two parties had talks since July.

The potential deal has been terminated after six long months of dialogue, according to The Block. The email, sent by Vauld founder and CEO Darshan Bathija to the firm’s creditors, states that “our discussions with Nexo have unfortunately not come to fruition.”

Nexo and Vauld had been in talks for a potential acquisition since early July when Vauld halted client withdrawals facing a liquidity crunch. Currently, Nexo entered into a 60-day exclusive due diligence agreement with Vauld to potentially acquire it. It then extended the due diligence period twice. As a result, the two parties formally ended the discussions.

“We have since sought a mutual agreement with Nexo to terminate the existing exclusivity arrangements and we are continuing our active engagement with the shortlisted fund managers in developing a viable strategy that would best serve the creditors’ interests,” Bathija said in an email.

According to a source with direct knowledge of the matter, there are a couple of reasons why the potential deal didn’t go through. These include Vauld losing a significant amount in the collapsed Terra ecosystem, Indian authorities seizing its assets, funds stuck on the bankrupt crypto exchange FTX and huge loan receivables from Amber Group. Moreover, Vauld has many customers in the US and Nexo recently announced its plans to leave the country, so the potential deal did not make sense for Nexo, the source said.

Previously, Nexo presented the potential deal terms to Vauld twice. However, Vauld and its creditors didn’t agree with those terms. 

“The Revised Nexo Proposal does not allow for a debt tender offer by way of a Reverse Dutch Auction (the ‘RDA’) which would give creditors an early exit option,” Bathija’s email reads. “We had explained to them that based on our engagement with creditors, an early exit option is vital to the success of any proposed restructuring. Unfortunately, the benefits offered under the Revised Nexo Proposal, such as an early credit withdrawal, are set at a threshold which in our view is generally unachievable by the majority of creditors. Given the above, we believe that the Revised Nexo Proposal would not be in the best interests of all the creditors.”

Now that the potential Nexo deal has fallen through, Vauld’s proposed restructuring plan is to select a fund manager to manage customer assets.

Vauld’s financial hole currently stands at $98 million, per the email. 

Vauld has until Jan. 20 to sort out its financial issues, having received another credit protection extension last month. However, according to a document obtained by The Block, the firm has applied for yet another extension, which reads: “We have the hearing for the moratorium extension on 17th January 2023.”