Vauld fallout: Investors in a tizzy over crypto investments

Surabhi | | Updated on: Jul 05, 2022
The lack of regulations on cryptocurrencies in India highlights that in such cases, investors will have little legal recourse.

The lack of regulations on cryptocurrencies in India highlights that in such cases, investors will have little legal recourse. | Photo Credit: CHINNAPONG

Experts say lack of regulation leads to little legal recourse. Nexo’s buyout of Vauld may be the only solution

Cryptocurrency investors in the country are in a tizzy with crypto exchange Vauld suspending all withdrawals, trading and deposits on its platform with immediate effect.

A number of investors are reaching out to their own exchanges to understand the safety of their investments. Social media is also abuzz with investors and experts raising concerns over the development, questioning how this took place and asking why influencers were promoting the company.

In what could possibly provide relief to Vauld users, London-based cryptocurrency lender Nexo on Tuesday announced plans to acquire Vauld.

“Nexo has signed an indicative term sheet with Vauld that grants Nexo a 60-day exclusive exploratory period related to its intended acquisition of Vauld, pending a satisfactory outcome of the initiated due diligence process,” the company said in a statement.

Upon successful completion of the transaction, Nexo plans to acquire up to 100 per cent of Vauld and reorganise its future operations with the aim of accelerating its deeper presence in Asia.

It also said it aims to provide immediate assistance and alleviate withdrawal limitations put in place on Vauld’s platform.

“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 per cent of Vauld,” said Darshan Bhatija, CEO, Vauld, in a tweet, adding that the completion of this transaction is pending due diligence, which both teams are working on.

Experts, however, point out that the lack of regulations on cryptocurrencies in India highlights that in such cases, investors will have little legal recourse.

Anupam Shukla, Partner, Pioneer Legal, said, “Considering that cryptocurrency exchanges are largely operating in an unregulated space in India, there is a lack of clarity as to the legal recourse available to Indian investors. Indian investors in Vauld would be governed by the terms of use of Vauld. As per the terms of use, the investors are governed by the laws of Singapore, with the Singapore courts having exclusive jurisdiction. In this case, Indian investors will have to initiate proceedings in Singapore courts if they are unable to recover their funds.”

He further said that a fair and robust regulatory framework is needed for exchanges offering services in India.

Singapore-based Vauld was founded in 2018 and offers crypto-based lending, borrowing, and trading. It also enables users to use their cryptos for fixed deposits with interest rates as high as 12.68 per cent.

Suspension of services

On July 4, Darshan Bhatija, CEO of Vauld, said the company was suspending all withdrawals, trading, and deposits on its platform with immediate effect, citing financial challenges.

Previously on June 21, the company had announced plans to cut the headcount by 30 per cent due to the economic slowdown.

The government has said taxing cryptocurrencies does not provide them legitimacy , while the Reserve Bank of India has also highlighted its concerns around such assets.

However, Vauld is not the only platform facing headwinds. A number of crypto exchanges across the world are in a similar situation, in what is being called the “crypto winter” as cryptocurrency markets crash.

Published on July 05, 2022
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