Singapore-based digital asset lender Hodlnaut is one of the latest companies struck by the cold hands of the crypto winter and the Terraform Labs collapse. The firm is experiencing some financial struggles, resulting in the suspension of withdrawals last August 8.
Hodlnaut applied for Judicial Management in Singapore to shield itself against creditors’ litigation. Additionally, the move was part of the firm’s efforts to recover from its decaying state. In a recent highlight of events, Hodlnaut has provided updates on its judicial management process and efforts at financial recovery.
Last week, the Hodlnaut team released a statement providing more insight into its financial situation and judicial management process. The firm highlighted the reasons behind its judicial management move and what the process could mean for customers.
Hodlnaut noted that its Hong Kong subsidiary’s exposure to Terra led to the firm’s current financial predicament. It also highlighted the high volume of withdrawals and the intense bear market as contributing factors.
“We believe that judicial management is the option which would most benefit our users now and in the long run,” the firm said. It said the process would help prevent the liquidation of its BTC and ETH holdings. Nonetheless, in the event of liquidation, the team mentioned that Hodlnaut would sell its assets to compensate users. However, users will only get a fraction of their deposits.
Secondly, the firm mentioned that the judicial management process would help it in the path to recovery and rehabilitation. With this, Hodlnaut plans to improve its debt situation so users can withdraw their complete funds. The interim Judicial Manager will step in to make decisions for the firm’s directors.
The Singapore Court has not yet appointed Hodlnaut’s interim Judicial Manager. However, once done, the Manager will review the firm’s accounts and assume decision-making control. The Judicial Management process will also protect Hodlnaut against litigation from creditors.
Hodlnaut suspends withdrawals, pulls out license application
Furthermore, Hodlnaut noted that it had reduced its workforce by a whopping 80% since halting withdrawals. This rate translates to approximately 40 employees laid off. The firm has taken this decision to reduce expenditure in these troubling times.
It also mentioned a reduction of burn rates to be able to stabilize its liquidity. Consequently, open-term interest rates will be reduced to 0% APR from August 22, 9 a.m. (UTC). The court will hear the firm’s application for a Judicial Management placement on the same date.
On August 8, Hodlnaut announced to its users that it would suspend withdrawals on its platform, a pattern that appears to have become common amongst digital assets lenders of late. The firm noted that the decision would help them stabilize liquidity and preserve assets.
Hodlnaut also mentioned that it would halt all borrowing and lending services and withdraw its license application to be registered by the Monetary Authority of Singapore (MAS).
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