Please click here to view the minutes of the first CC Meeting.
Q&As as of 20-Oct-22.
Committee of Creditors
Debt Tender Offer
Potential Nexo Acquisition
India Funds and Liabilities
Timeline and Next Steps
Committee of Creditors
1. What is the Role of the Defi Payments Creditors’ Committee (“CC”)?
The role of the CC is: (i) to act as a consultative committee for Defi Payments and its advisors; (ii) to express the views of the general unrepresented creditors in providing feedback and/or any other comments on the restructuring process; and (iii) to attend court hearings, if any, on behalf of the unrepresented creditors.
To clarify, the CC does not have powers to vote on behalf of creditors on the Restructuring Proposal.
Please also note that the CC does not represent Vauld in its communications to creditors.
2. How can we contact the CC?
Creditors can contact the CC directly at the following email address: firstname.lastname@example.org. Queries and comments will be conveyed to the CC for consideration.
3. Who are the members of the CC?
The members of the CC are customers of Vauld who have been selected on the basis of having no conflict of interest and overall are representative of the general body of creditors. Certain members of the CC have identified themselves on public forums however we are not at liberty to name members of the CC due to privacy reasons.
4. How will the progress of the Restructuring be shared with the wider body of creditors?
Defi Payments will provide regular updates to the Court via affidavit, that will be made available via email blast to all creditors, including in relation to the formation of the CC and items of discussion between the CC, Defi Payments and Kroll, as financial advisors.
1. How can creditors get 100% of their funds back?
Defi Payments, together with Kroll, has been formulating a potential restructuring which contemplates the conversion of Defi Payments assets into a fund which would be managed by a third party professional crypto asset fund manager proposal (“Restructuring Proposal”). Recoveries under the Restructuring Proposal would depend on the performance of the fund. It is possible that the returns to creditors may exceed 100% depending on fund performance.
The Restructuring Proposal would deliver returns to creditors potentially in excess of 100% to achieve a significantly better outcome than in a liquidation.
In parallel with the exploration of the Restructuring Proposal, Vauld is in exclusive negotiations with Nexo for a potential acquisition of the Vauld Group (the “Potential Nexo Acquisition''). It is a possible outcome of any deal with Nexo that creditors may recover 100% of their claims.
To clarify, the Restructuring Proposal and Potential Nexo Acquisition are separate alternatives completed under the restructuring.
Under no circumstances would the creditors of Defi Payments recover 100% of their claims in a liquidation where estimated recoveries are expected to be the range of 38% and 49%.
2. How will Vauld customer account balances be treated in the restructuring?
Under the Restructuring Proposal, the balance of the Vauld customer accounts including principal and accrued interest up to the date of implementation of the Restructuring (the “Effective Date”) will be crystallized as units in the fund to be redeemed over time.
It is anticipated that under the Potential Nexo Acquisition, Vauld customer account balances would be transferred to the Nexo platform. However the terms of any such possible arrangement are currently under discussion between the parties.
3. Will creditors get the benefit of any appreciation in principal or accrue interest on their cryptocurrency balances in the restructuring?
Interest will accrue on Vauld customer account balances up to the effective date of the proposed scheme of arrangement (which would likely be required in the Restructuring Proposal or the Potential Nexo Acquisition).
It is anticipated that under the Potential Nexo Acquisition, Vauld customer account balances would be transferred to the Nexo platform, however, with a lock up on withdrawals for a defined period. The terms of any such possible arrangement, including whether interest would continue to accrue on existing balances, are currently under discussion between the parties.
4. How is the Potential Nexo Acquisition related to the Restructuring Proposal?
The terms of the Potential Nexo Acquisition are currently under discussion by the parties. Any terms that may be agreed between the parties may be incorporated into the Restructuring Proposal to be voted upon at a meeting of Defi Payments creditors to be convened by the Court; or may be an entirely separate arrangement. This depends on the outcome of ongoing discussions with Nexo.
5. Is the Restructuring Proposal final?
We are in process of developing the Restructuring Proposal and have sought initial feedback and comments of the CC on the draft terms of the same. The draft terms of the Restructuring Proposal are not yet finalized but rather for the purpose of facilitating discussions with the CC.
The draft terms of the Restructuring Proposal will be shared with the wider body of creditors via the 7th Affidavit of Darshan Bathija to continue with our approach of providing full transparency throughout the restructuring process. While we welcome your feedback, we humbly request your patience in allowing us time to develop the final Restructuring Proposal.
6. Would interest accrue under the terms of the Restructuring Proposal?
Interest would continue to accrue up to the Effective Date of the Scheme at which time the draft terms of the Restructuring Proposal contemplate that Vauld customer account balances would be crystallized as units in a fund to be redeemed over time.
7. When would withdrawals be allowed under the terms of the Restructuring Plan?
The draft terms of the Restructuring Proposal contemplate the establishment of a fund where creditors would be permitted to make phased withdrawals of the equivalent of 25% of claims each year upon the implementation of the restructuring plan.
The draft terms also allow for an early liquidity event where Vauld customers would be provided with an opportunity to participate in the RDA for a debt buyback of their claims offered to Defi Payments at a discount.
8. Who would be the fund manager under the Restructuring Proposal?
Defi Payments, together with Kroll as the financial advisors, are working to identify suitable possible candidates as crypto asset fund managers with a strong track record in terms of performance.
There would not be any fund established in the event of an acquisition by Nexo and therefore no requirement to engage the services of a fund manager.
9. Is it possible to name Counterparty A?
Vauld has entered into a non-disclosure agreement with Counterparty A and is under an obligation not to disclose the name of the Counterparty A (as disclosed in the First Affidavit of Darshan Sunil Bathija dated 8 July 2022). Vauld can however confirm that Counterparty A is not Nexo Inc.
Debt Tender Offer
1. What is a Debt Tender Offer?
Under the draft terms of the Restructuring Proposal, the Debt Tender Offer would be conducted by way of a Reverse Dutch Auction (“RDA”).
All Scheme Creditors will be provided with the opportunity to participate in the RDA for a debt buyback by Defi Payments. The buyback will be subject to a cap of ~USD65m of available liquid assets for payment to participating Scheme Creditors (“Buyback Assets”)
Scheme Creditors will be invited to participate in the RDA for the Buyback Assets by offering their claims in the Restructuring up for purchase at a discount by Defi Payments
In any auction there are buyers who offer a bid price, and sellers who offer an asking price. In a traditional auction, there is only one seller, and many buyers bidding. Any buy bid offering the highest price, will generally be accepted first, followed by the bid offering the next highest price.
In the RDA under the Restructuring Proposal, there would be many sellers (Defi Payments creditors), but only one buyer (Defi Payments) considering such offers. Any ask offer setting out the highest offered discount, i.e. the lowest selling price, will generally be accepted first, followed by a sale offer setting out the next highest offered discount, i.e. the next lowest selling price, and so on. This process goes on until the available funds have been used up.
For example, if there are 3 creditors making ask offers in the RDA:
Creditor A: Offers to sell claims in the Restructuring at a 70% discount, i.e. a 30% recovery;
Creditor B: Offers to sell claims in the Restructuring at a 60% discount, i.e. a 40% recovery; and
Creditor C: Offers to sell claims in the Restructuring at a 50% discount, i.e. a 50% recovery.
Creditor A’s offer would be accepted first as it represents the highest offered discount. Thereafter, for as long as the allocated funds remain available, Creditor B’s offer would be accepted next and Creditor C’s offer after both Creditors A and B.
The claims of creditors who do not participate or who are unsuccessful in the Debt Tender Offer will remain in the Restructuring.
2. How might the Potential Nexo Acquisition be dependent on the outcome of the RDA?
A successful RDA would result in a reduction of the net asset deficit of Defi Payments and so would impact the economics of any deal by reducing the level of capital injection that may be required, which at this stage is unable to be determined.
Potential Nexo Acquisition
1. What is the status of discussions with Nexo?
To the best of our understanding, Nexo has completed due diligence on the basis of extensive information provided by Vauld and discussions are ongoing regarding commercial terms.
2. What are the terms of any deal with Nexo likely to be?
Defi Payments has not yet entered into any agreement with Nexo. However discussions would indicate that it is likely that parties may be able to arrive at a deal where Vauld customer accounts with remaining balances after a RDA has completed would transfer to the Nexo platform with full repayment (on principal amounts) anticipated. There would however be restrictions on withdrawals for a defined period.
Feedback and commentary from general creditors have been duly noted and will be taken into account in negotiations. A transfer of customer balances between the platforms will necessarily imply many practical considerations such as where tokens held in the Vauld customer accounts may not be supported on the Nexo platform. For all such circumstances, we are working towards a fair outcome between creditors in our discussions with Nexo.
India Funds and Liabilities
1. What is the status of the freeze by the Enforcement Directorate on Flipvolt’s assets in India?
Vauld Group continues to provide full cooperation with the Enforcement Directorate in their investigations. It is reasonably expected that the assets will be made fully available to Flipvolt within around a year.
2. Will INR balances be paid out to Vauld Group creditors under the restructuring plan?
INR balances owed to Vauld customers are payable by Flipvolt Technologies Pvt. Limited (“Flipvolt”) and not Defi Payments. The Restructuring Proposal contemplates that all INR balances will be repaid in full to Vauld customers by Flipvolt in priority to any amount owed by Flipvolt to Defi Payments.
Timeline and Next Steps
1. What is the estimated timeline of the Restructuring?
The timeline of the restructuring is anticipated to be at least a further four months and so Defi Payments will apply to the Court for an extension of the moratorium for continued protection in relation to legal claims against Defi Payments.
2. What are the next steps required from creditors of Defi Payments?
For now, there is no immediate action to be taken by the creditors of Defi Payments, pending the concretisation of the restructuring plan (whether it is the Restructuring Proposal or the Potential Nexo Acquisition or a combination of both).
Once the terms of the restructuring plan have been finalised, details of the plan along with an explanatory statement will be shared with the creditors for their perusal. Defi Payments will then need to make an application to the Singapore Court for leave to convene a meeting of creditors to vote to pass the restructuring plan by way of Scheme of Arrangement.
If and when the Court grants leave to convene the meeting of creditors, so as to facilitate the identification of creditors for classification and voting purposes, creditors will be invited at a later date to submit claims in the restructuring via a Proof of Debt form to be included in the voting for the Scheme of Arrangement at a Creditors’ meeting. No further action is required from creditors at this stage and Defi Payments will provide creditors with sufficient notice at the appropriate time with clear instructions on how to submit claims. An Explanatory Statement detailing the terms of the Restructuring Proposal will be distributed to creditors in advance of the Creditors’ meeting to allow creditors to make an informed decision to vote.