Troubled crypto exchange Would successfully appealed to a Singapore court to extend its creditor protection after its deal with Nexo failed.
Wald has until February 28, 2023 to develop a restructuring plan, as client funds are still frozen. Its previous deadline was January 20, 2023.
Would rejects Nexo proposal, seeks fresh funding
According to the affidavit, two fund managers are interested in buying the organization after Wald’s deal with Nexo fell through. Nexo signed a term sheet to acquire Singapore’s exchange in July 2022, an offer the exchange recently rejected. Wald halted withdrawals in early July 2022, when customers withdrew $200 million in the wake of the Terra Luna eruption.
Tensions reached a peak in the first week of January 2023, when Nexo suggested that Vault was pushing its retail customers down the pecking order by refusing its buyout offers.
Nexo’s recent announcement that it would be winding down its US business raised doubts over whether it would repay Would’s US creditors should it acquire Would. Additionally, authorities recently raided Nexo’s Bulgarian office in Sofia due to the lender’s alleged involvement in tax fraud and money laundering.
No point in raising $400 million
With Nexo’s exit, Wold faces a battle to secure funding to keep itself afloat and avoid bankruptcy. The Singapore company owes creditors about $400 million, of which retail customers owe about $363 million.
If the exchange fails to finalize an acquisition deal before February 28, 2022, its retail clients could be among the last to be completed.
Furthermore, waning enthusiasm in crypto venture capital investment suggests that many investors with resources are making more prudent bets based on a company’s financial condition and prospects for success.
Investment in crypto has declined by about $2.3 billion at press time in the three quarters from a year earlier. While investment began to cool in early 2022, FTX’s high-profile implosion caused the most significant pullback, which is ironic since FTX’s former CEO gained a reputation for swooping in to help troubled firms.
Many companies, including FTX, failed in part due to poor risk management, which left them unable to withstand periods of continued liquidity stress.
While not an investment fund, Binance’s Recovery Fund targets crypto companies suffering such repercussions. The fund seeks to pledge money from various partners to help other companies as per strict eligibility criteria. These include long-term value creation of a firm, a clearly defined business model and strong risk management.
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