Key takeaways :
- Singapore’s Hodlnaut faces liquidation as confirmed by former managers Lee and Ee.
- High Court filing on Nov. 10 initiates liquidation, updates to be given to 17,000+ creditors.
In a significant turn of events, the High Court’s decision to order the liquidation of Singapore-based cryptocurrency lending platform Hodlnaut marks the climax of a tumultuous financial narrative.
Dated November 10, the court document revealed the company’s unsuccessful attempts at restructuring following substantial financial setbacks linked to the Terra/Luna crash and the collapse of FTX last year.
Hodlnaut’s downward spiral commenced with a staggering loss of $189.7 million in the Anchor Protocol, a now-defunct DeFi platform tied to the Terra stablecoin UST. Compounded by the entanglement of over $13 million in assets in the FTX exchange’s bankruptcy, the company found itself in dire straits.
Seeking shelter from immediate liquidation, Hodlnaut pursued judicial management to shield its remaining crypto assets from an enforced sell-off.
In the midst of these developments, a Bloomberg report highlighted the Algorand Foundation’s stance, asserting that liquidation would “maximize the company’s remaining assets available for distribution.” Despite a plea to remove previously appointed judiciary managers, the court overruled this request.
Hodlnaut had initially downplayed its exposure to the Terra ecosystem, which had taken a toll on the company and other crypto firms. The reported loss of over $190 million from the Hodlnaut platform due to its Terra exposure echoed a challenging period, as confirmed by Cheng Lee and Angela.
Seeking to stave off insolvency, Hodlnaut pursued judicial management in February 2023, aiming to restructure its debts and operations under court supervision. Despite efforts to forestall immediate liquidation and safeguard remaining crypto assets from a forced sell-off, the company faced resistance from creditors who rejected the proposed restructuring in favor of a liquidation vote.
The winding-up process, based on the Insolvency, Restructuring, and Dissolution Act of 2018, is set to commence in the following weeks. This follows the rejection of a restructuring proposal by over 17,000 creditors in January, leading them to opt for liquidation over a plan where the former directors overseeing the company’s collapse would have managed the restructuring.
To navigate potential forced liquidation, Hodlnaut secured court-appointed IJMs, gained creditor protection, reduced its staff by 80%, and addressed a police investigation concerning the delayed reporting of its USTC holdings.
Throughout this tumultuous journey, Hodlnaut halted withdrawals and withdrew its license application from the Monetary Authority of Singapore (MAS).
The company’s struggle to weather the storm, amidst financial losses and legal challenges, culminated in the court-ordered liquidation, marking the denouement of Hodlnaut’s trajectory in the crypto lending landscape.