Online Meeting and Q&A dt 11-May-23
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Written by Vauld
Updated over a week ago

We would like to thank all creditors who participated in our online meeting.

For those who could not make it, please find the link to the video recording of online meeting held on 11 May 2023 at 7.00 pm (Singapore time) here. The slides used during the session can be found here.

Q&As dt 11-May-23

1. Assets and Liabilities

2. Business Restart

3. Governance

4. INR Payments

5. RDA and Withdrawals

6. Rebalancing and Conversion

7. Scheme

8. Voting

1. Assets and Liabilities

1.1 Will I get a document to show that I the rest of my claim is written off for tax purposes?
Yes, Vauld can provide substantiation of losses to creditor if they need it for tax purposes. Creditors can reach out to Vauld Care to request for the information they require after the Scheme Effective Date and information provided will be on a case-by-case basis.

1.2 While the interests accrued for fixed deposits are being waived off, why is Vauld collecting interests till the closure of loans?
Platform loans and Vauld account token balances are legally not viewed in the same way. Contractually, the platform loans are still in effect and are accruing interest, and Vauld cannot liquidate customer loans unless the collateral amount falls below the threshold. Under the Scheme, the terms allow for customer loans to be liquidated and net off against collateral and can only be effected on the Effective Scheme Date.

1.3 Can you share a summary of all the receivables? The expected timelines and the chances of recovery.
Based on valuation estimates as of 24 April 2023, the Company has a total net illiquid assets of USD185.6m which consists of receivables from Counterparty A (USD133.7m), CoinLoan (USD32.1m) and Flipvolt (USD19.8m).

In relation to Counterparty A, there are pending related arbitration proceedings initiated by Counterparty A against Darshan, who acts as a custodian on behalf of the Company. We believe it is reasonably arguable that he has an entitlement to the return of the assets by June 2023. For the purposes of presenting the restructuring scenario, we estimated that the realisation of Counterparty A receivables will take place in 3Q2024.

In relation to CoinLoan, the Company understands that a bankruptcy application has been filed against Coinloan in Estonia by another of its creditors and intends to join in this proceedings. For the purposes of presenting the restructuring scenario, we estimated the realisation of Coinloan receivables will take place in 2Q2026.

In relation to Flipvolt, Flipvolt is contesting the freezing of its accounts and submitted an appeal on 5 April 2023 with the Appellant Adjudicating Authority in India to pursue an unfreezing of Flipvolt’s assets. For the purposes of presenting the restructuring scenario, we estimated the realisation of Flipvolt receivables will take place in 2Q2024.

1.4 Clause 8.1 “The Company shall, during the Prescribed Period, use all reasonable efforts to recover and collect all Illiquid Assets of the Company.” What happens after the Prescribed Period?
While the Scheme defines the Prescribed Period as the 36 months after the Effective Scheme Date, the Scheme Manager may extend the Prescribed Period for a further 3 months each time, subject to Full Board Approval obtained. Therefore, the Prescribed Period includes any extensions and will end when the Scheme ends. At all times during the restructuring, the Company is bound to use all reasonable efforts to recover and collect all Illiquid Assets

1.5 How does the market recovery help us?
Scheme Creditors will hold a percentage share of overall claims as at 4 July 2022 in a token composition of BTC, ETH, XRP or USDC. This percentage share also represents their percentage claim against the assets of the company.

If the value of token prices appreciates materially, Scheme Creditors will still receive their percentage claim against the assets of the company. Depending on the magnitude of token price appreciation, there is potential for Scheme Creditors to receive USD recoveries significantly in excess of their original claims in USD terms as of 4 July 2022.

2. Business Restart

2.1 Why is Vauld intending to do a business restart?
The mechanics for the incorporation and implementation of the New Business are subject to Full Board Approval, which includes the Creditor Representative. The Creditor representative will have all the rights to suggest a new decision, if the Creditors don’t want it.

The business restart is only a recommendation that we are making to the next board - the viability of the business and its launch, including the token creation, is up to the board to decide.

3. Governance

3.1 Vauld does need to address or eliminate the clause A, shown under the End of the Scheme. Under this clause, the Scheme Manager could decide to forfeit 170,000,000 without any oversight or check on his power

The Creditor Representative has more than the power to suggest decisions in respect of the declaring the end of the Scheme. As this decision is a reserved matter, it requires 100% board approval and thus there is no way that the Scheme Manager or CEO can unilaterally decide to forfeit the illiquid assets without the Creditor Representative’s consent.

3.2 Selection of Creditor Representative - Would this have a weightage for the value of the claim or is it only based on who gets the most votes?

We are looking to consider both value and number in this determination and will provide more details subsequently.

3.3. Clause 8.4 “the Scheme Manager shall have the discretion to extend the Prescribed Period for a further 3 months at each time subject to Full Board Approval being obtained.”. Until what point – this appears to enable the Prescribed Period to continue indefinitely? What control do Creditors have on this?

The Prescribed Period would not continue indefinitely, as it is of the Scheme Manager's intention to ensure a timely and reasonable payout to Scheme Creditors who are staying in the restructuring. The extension of the Prescribed Period is subject to full board approval, which includes the approval from the creditor representative. Lastly, continuations of the Prescribed Period is limited by available liquid assets to fund operations.

3.4 Clause 12.2(C) - to be selected by the body of Scheme Creditors from a list of shortlisted nominees provided by the Company and/or the Scheme Creditors (the “Creditors’ Representative”). For reasons of transparency and trust, the Creditors Representative must not be put forward by the Company? This paragraph should be amended. Otherwise the Board will hold no confidence/trust and be therefore void?

Creditors Representatives are not just put forward by the Company. Clause 12.2(c) also allows for Scheme Creditors to put forward their nominees. The selection of the Creditors Representative (whether nominated by the Company or Scheme Creditors) are conducted by way of a vote.

3.5 Clause 12.3 - The selection of the Creditors’ Representative would be conducted by way of a vote in a manner prescribed by the Company. Are all Creditors going to be advised of the manner in which this Company prescribes the voting?

The manner is set out in clause 5.40 of the Explanatory Statement - Scheme Creditors will vote on the finalised list of nominations concurrently with voting on the Scheme. Upon the Scheme Effective Date, the Company will engage with the nominee with the most votes to agree acceptable terms of engagement. If terms cannot be agreed, the Company will engage with the nominee with the second most votes until a Creditor Representative is appointed.

3.6 Clause 12.5 – the New Board shall, within 3 calendar months of such removal, seek the replacement of the Creditors’ Representative. What happens if an important decision has to be made, should there be Creditors Representative in place? 3 months is a long time.
Sufficient time is required to conduct a replacement of the Creditors Representative similar to the appointment of Creditors Representative at the Scheme Effective Date. This includes seeking nominations from the Company and/or Scheme Creditors, conducting a due diligence process on nominees, conducting a vote, and agreeing terms of engagement with the Creditors Representative.

3.7 Clause 12.6(b) – Demonstrably unable or unwilling to act in a balanced manner, in good faith, and for the best interests of creditors. It may be that the best interests of Creditors is in opposition to what the Board and Company wish to do? So does this provide a vehicle for removing opposition to them? Who is almost certainly best placed to decide what is in the best interests of the Creditors, if not their Representative?
In this case, the Board and Company does not have the power to remove a Creditor Representative - they may only set out the grounds for removal of a Creditors Representative. The removal is decided by passing of a Special Resolution (50% in numbers and 75% in value) of Scheme Creditors. If Scheme Creditors decide the Creditors Representative is acting in their best interest in opposition to the Board, they may vote to retain the Creditors Representative.

3.8 What if the Scheme document is not adhered by Kroll or Defi Payments?

The Scheme Manager has duties akin to an officer of the Court and is appointed to oversee the implementation of and compliance of the Scheme. As directors of the Company, the New Board has a duty to adhere to the Scheme.

3.9 Clause 12.8(b) - The Company shall have the sole discretion to determine the following in respect of any New Director. Any process or procedure relating to the proceedings of the New Board, including but not limited to the quorum of the New Board, the passing of resolutions, the replacement, removal and/or appointment of directors in the New Board, and the powers and duties of the New Directors. The new Board is meant only for running things. Why is it different?

This is meant to capture and provide flexibility for matters which is not defined by the Scheme. The Company and its directors will need to adhere to matters specifically set out in the Scheme e.g. full board approval required for reserved matters (approval of New Business plan, material deviations to restructuring costs, extension of Prescribed Period), appointment and removal of Creditors Representative via voting by Scheme Creditors.

3.9.1 ALL of Part 12 makes it difficult for Creditors to appoint or retain their representative. Unless he/she then appears to not be working in their best interests, where it becomes difficult to remove him/her? How do we simplify and ensure this is made easier?

The appointment and removal of a Creditor Representative is decided by way of vote by Scheme Creditors.

3.9.2 Clause 16.3 - The Scheme Manager shall not be responsible: (a) for the adequacy, accuracy and/or completeness of any information (whether oral or written) supplied by the Scheme Manager, the Company or any other person given in or in connection with this Scheme; or (b) for the legality, validity, effectiveness, adequacy or enforceability of this Scheme or any other agreement, arrangement or document entered into, made or executed in anticipation of or in connection with this Scheme. The Scheme Manager is the one that helped design, create and sell this scheme – how can they then be totally exempt from the consequences of it? They are being paid a Performance Bonus to get it implemented, yet can’t be held liable?

The role of the Scheme Manager is to oversee the implementation of the Scheme and its provisions, which includes the conduct of RDAs, distributions to Scheme Creditors and realization of Illiquid Assets (see clause 14.3 of SOA under Powers, Duties and Discretions).

The Scheme Manager is not paid a performance bonus, but a monthly fee of approximately USD10,000 per month to oversee the Scheme post-implementation.

3.9.3 What are the costs we will incur over the restructuring? Why have we not scaled down the expenses further?

Over approximately 3 years, the Company will incur USD9.4m for the restructuring. The Company has worked to minimize its operating costs from approximately USD558,000 per month historically to approximately USD242,000 per month going forward. These costs are necessary for the Company to continue operating and meeting its obligations under a Restructuring.

4.0 INR Payments

4.1 Why are we changing the payout plan for INR Creditors? Earlier it was told that the payments will be made in 7 days of the Scheme Implementation, which is not changed to 2 calendar months? Can we make the payment for INR creditors by July?

The payout plan for INR Creditors has changed to 2 months from 7 days, as time is needed to convert USDC / USDT to INR which has limited liquidity in the market and will have to be done in stages. We have also accounted for time delays in carrying out the transfers of INR to Flipvolt Indian bank accounts, and INR transfers from Flipvolt Indian bank accounts to INR creditor bank accounts.

4.2 Please explain about converting INR claims to USD linked stablecoin. Will that be done on the latest market prices?

Yes, it will be at market prices.

4.3 Where does the money for the potential loan to Flipvolt come from? Are the non-INR creditors now going to be landed with an even greater illiquid Asset?

The monies for the potential loan to Flipvolt will come from Defi Payments, provided Flipvolt does not have sufficient liquid assets to make the payments to INR creditors. This constitutes an increase in the intercompany receivables owing from Flipvolt and accordingly, a major illiquid asset of Defi Payments.

5.0 RDA and Withdrawals

5.1 RDA – Are you voting a % of your total Crypto? Or a % of the USD Value as of 4th July 2022?

Creditors participating in the Initial RDA will be voting a % of their crypto. The allowable range of % bids on crypto will be adjusted at the start of the Initial RDA to ensure that the final % USD recovery will range between 30% to 55% to ensure there is no arbitrage as a result of the Initial RDA. Successful bids will be repaid in the winning % bid applied to their crypto balances in the Vauld Account as at 4 July 2022.

5.2 Clause 9.13 - Withdrawals from the Vauld Platform (as assets are received) – What rate (%) does the platform intend to levy on withdrawals?

Vauld does not levy fees for withdrawals out of the Vauld platform. However, when users transfer their crypto holdings out to other platforms, they may incur gas fees for the transaction, which will be borne by the creditor.

5.3 Clause 10.9 (also 10.11) - During the RDA Period, strict confidence shall be observed by all parties participating in the RDA, including the Company, the Scheme Manager and the RDA Agent, in respect of information relating to the number and details of the RDA Bids received. How is this transparency guaranteed?

Please refer to clause 5.27 of the Explantory Statement. Statistics on the RDA may be disclosed, including (i) the total number of bids and value of claims submitted for the RDA, (ii) the range of bids submitted for each token, (iii) number of successful bids, (iv) the range of bids accepted for each token, (v) value of assets utilised for the RDA, (vi) claims extinguished from the RDA and remaining Claims in the restructuring, and (vii) detailed information on a Scheme Creditor's own bid upon request by that Scheme Creditor.

5.4 After the 1st distribution through liquid assets, will the subsequent distributions happen only if the illiquid assets are recovered in full?

No, subsequent distributions can still happen if illiquid assets are recovered partially. Per clause 9.4(a) of the Scheme, at the end of every 6 months after the Effective Scheme Date if there is a net recovery of at least USD10m (partial or full) the Company will distribute the recovery either by way of RDA or pari passu distribution.

5.5 Please explain partial RDA - does this have to be wholesome? For e.g. I have 10 BTC, 10 ETH. Can I bid 5 BTC and 5 ETH.

The percentage submitted for partial RDA will be applied pro-rata across the Scheme Creditor's claim i.e. if 50% submitted for RDA and applied to 10 BTC and 10 ETH, only 5 BTC and 5 ETH will be submitted for the RDA.

5.6 When will the withdrawals be allowed?

The payout for the Initial RDA is estimated to take place between the 3rd and 4th week of July 2023, with the pari-passu distribution of remaining liquid assets taking place during the 4th week of August 2023. The timelines are subject to the Court Hearing date for the Sanction application. The subsequent RDAs and pari-passu distributions depend on the amount and timing of illiquid asset recoveries.

Your wallet balances will reflect that your crypto balances are able to be withdrawn from the Vauld platform, subject to the completion of KYC.

5.7 Clause 9.8 - The Scheme Manager shall notify Scheme Creditors of the Final Distribution and invite Scheme Creditors to participate in the Final Distribution. Will this final distribution be pari-paasu?

5.8 What happens to the crypto that I hold in Vauld wallet after the restructuring? Can I transfer this to another Crypto wallet?

After the Initial RDA / pari-passu distribution, wallets will reflect your withdrawable crypto balances. This can be transferred to another crypto wallet. This transfer can happen before the end of restructuring.

5.9 What are the timelines from here? When do I vote? When do I have to decide on the RDA? When will I get my funds?

Please refer to the Online Meeting slides for the extensive Scheme timeline. You will get to vote on the Scheme and choice of Creditor Representative from 24 May to 31 May 2023 ("voting period").

It is estimated that you can participate in the Initial RDA by the 2nd week of July 2023.

If you are successful in your Initial RDA bid, it is estimated that you will receive your payment end July 2023. These timelines are subject to the Court's schedule to obtain a Court Hearing date for the Sanction Application.

5.91 What does an RDA even mean? Why is it being offered? (Why not just pay everyone via pari passu?)

The RDAs are intended to give Scheme Creditors an option to exit early at a potentially higher recovery than: (i) if available liquid assets were distributed pari-passu without RDA, or (ii) stay in the Restructuring and be potentially rewarded for taking on the risk in relation to subsequent recoveries of Illiquid Assets.

5.9.2 If you were me, what would you do - RDA vs pari passu?

Scheme Creditors who need liquidity can opt for the Initial RDA to exit the Restructuring immediately at a recovery higher than 36% and avoid taking on illiquid asset realization risk.

Scheme Creditors who decide to stay in the Restructuring and take on Illiquid Asset realization risk can potentially get higher overall recoveries driven by reduction in Scheme Debt from RDAs, at the cost of potentially getting lower recoveries in the event of impairments to Illiquid Asset realizations.

Whilst it is up to the choice of Scheme Creditors to take their own view, the Company has prepared an online tool to aid creditors in understanding the proposed Restructuring which may be accessed at:

6.0 Rebalancing and Conversion

6.1 There will be some X USD recovered in the end. If someone's choice of conversion changes their USD equivalent recovery, will it also affect others' recovery?

The conversion is designed not to impact others’ recovery – the company will only convert the liquid assets held pro-rata against claims of creditors who participate in the conversion. The liquid assets held pro-rata against claims of creditors who do not participate in the conversion will not be converted and thus will not be affected from the conversion step.

6.2 User wants to know if they can choose multiple tokens at the time of conversion. Example:

100 ADA - convert to XRP

100 Cake - convert to ETH

100 Matic - convert to BTC
Yes, this is possible. Conversion will be on a whole basis though. For e.g. User cannot convert 50 ADA to BTC and the remaining 50 ADA to ETH.

7.0 Scheme

7.1 If this scheme gets approved or if this scheme gets disapproved, what are other ways to recover our money. Also what is the average % of recovery we can expect from each process/scheme?

If the Scheme is not approved by the general body of Scheme Creditors, it is likely that the Company will enter into liquidation. Assuming a 100% illiquid asset realisation, a restructuring scenario will yield 93% recoveries whilst a liquidation scenario will yield 78% recoveries (refer to section 10.3 of ES for different level of illiquid asset realisations).

8.0 Voting

8.1 How will the Scheme Creditors be classed for the purposes of determining the Requisite Majority?

There will be two voting classes of Scheme Creditors for the purposes of determining the requisite majority: (1) creditors of Defi Payments only and (2) creditors of both Defi Payments and Flipvolt.

8.2 How the vote results will be verified, published and what options are available to creditors to engage with independent audit of the votes administered by Kroll IS?

Once the Voting Period ends, votes received will be calculated by a Tabulation Agent under the supervision of the Scheme Manager. Once the Tabulation Agent is done, the Scheme Manager will review the votes. If satisfied, the Scheme Manager will provide written notice to the Independent Assessor.

Once the Independent Assessor has reviewed, the Independent Assessor will provide written notice to the Company. The Company will then notify Scheme Creditors via email of the voting results. Scheme Creditors are not able to request for an independent audit of the votes administered.

8.3 What are the voting thresholds for a Scheme to pass?

The Scheme will only be passed if at least 50% of the creditors or class of creditors (present and voting) holding at least 75% in value of debt claims agree to the proposed Scheme.

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