Hodlnaut Faces Liquidation as Singapore High Court Ends Judicial Management

The Singapore High Court has made a significant decision regarding the future of crypto lender Hodlnaut, ordering the company into liquidation and terminating its judicial management. This move comes after a period of financial turmoil for the company, with users’ funds being inaccessible since August 2022.

The End of Judicial Management

On November 10, a letter posted on EY’s website detailed the court’s order for Hodlnaut’s liquidation. Aaron Loh Cheng Lee, the former interim judicial manager, along with Ee Meng Yen Angela, were discharged from their roles and appointed as liquidators. The court’s decision, currently sealed, follows their application to wind up the company.

Troubled Times for Hodlnaut

The Singapore-based Hodlnaut had previously suspended all deposits and withdrawals on August 8, 2022, attributing the decision to unfavorable market conditions. At that time, the company also retracted its licensing application with the Monetary Authority of Singapore. The letter from Lee reveals that Hodlnaut’s list of creditors includes 17,000 users and several major creditors such as Samtrade Custodian, S.A.M. Fintech, and the Algorand Foundation.

Impact of Industry Instability

Hodlnaut’s struggles reflect the broader instability in the cryptocurrency sector, exacerbated by the downfall of the Terra ecosystem and Three Arrows Capital. Although not directly impacted by Three Arrows Capital, Hodlnaut reportedly had significant investments in Terra’s stablecoin, which experienced a notable collapse.

Efforts to Avoid Forced Liquidation

In an attempt to prevent forced liquidation, Hodlnaut had obtained court-appointed interim judicial managers, secured creditor protection, and reduced its workforce by 80%. The company also faced a police inquiry regarding a delay in reporting its holdings of TerraUSD Classic (USTC).

Creditors Favor Liquidation Over Restructuring

Despite efforts to restructure, creditors voted against a proposed plan in January and later favored liquidation in April. A notable bid by OPNX for a majority stake in Hodlnaut was turned down after the value of the offered FLEX token dropped significantly.

Broader Crypto Lending Sector Developments

The decision to liquidate Hodlnaut comes shortly after a U.S. court approved the bankruptcy plan for another crypto lender, Celsius, on November 9, indicating ongoing challenges and restructuring efforts within the crypto lending industry.