- Singapore’s High Court has mandated the liquidation of Hodlnaut, ending its judicial management phase.
- The company, once a key player in the crypto lending market, faced significant challenges after the Terra ecosystem collapse and FTX downfall.
- Hodlnaut’s investment in TerraUSD Classic (USTC), approximately $150 million, contributed to its financial distress.
Singapore’s High Court has ordered the liquidation of crypto lender Hodlnaut, marking a significant turn in the company’s ongoing financial struggles. This decision, taken in response to an application by Hodlnaut’s interim judicial managers (IJMs), ends the judicial management phase and signals a new chapter addressing the firm’s financial woes.
Hodlnaut, once a prominent player in the crypto lending space, faced severe challenges following the collapse of the Terra ecosystem and the subsequent turmoil in the crypto market. Despite not having direct exposure to Three Arrows Capital (3AC), Hodlnaut reportedly held significant investments in Terra’s stablecoin, TerraUSD Classic (USTC), amounting to around $150 million. The firm’s financial situation further deteriorated with the downfall of FTX, another major entity in the crypto industry.
The crypto lender’s journey through these challenges has been tumultuous. On August 8, 2022, Hodlnaut suspended deposits and withdrawals, a move attributed to the prevailing market conditions. This decision coincided with the withdrawal its licensing application from the Monetary Authority of Singapore. As a result, users’ funds have been frozen since August 2022, affecting approximately 17,000 creditors. Notable creditors include Samtrade Custodian, S.A.M. Fintech, and the Algorand Foundation.
To navigate through its financial difficulties, Hodlnaut sought and received court-appointed IJMs. This move provided the company with creditor protection and allowed it to reduce its workforce by 80% significantly. Moreover, the firm faced a police investigation concerning the delay in reporting its USTC holdings.
Despite these efforts, Hodlnaut’s creditors overwhelmingly voted for liquidation in April, rejecting a proposed restructuring plan in January. Additionally, an offer in August 2023 from OPNX, founded by former 3AC founders Su Zhu and Kyle Davies, was declined by the IJMs after a significant drop in the value of OPNX’s FLEX token.
The liquidation order by the Singaporean court follows a similar path taken by other crypto lenders, such as Celsius, whose bankruptcy plan was approved by a U.S. court just a day before Hodlnaut’s liquidation announcement. The decision of the High Court, currently sealed, brings a close to Hodlnaut’s efforts to salvage its operations through judicial management. Aaron Loh Cheng Lee and Ee Meng Yen Angela, the former IJMs, have been appointed liquidators to oversee this new phase.