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Hodlnaut, a cryptocurrency lending platform that collapsed due to the crypto downturn, has been under judicial management since August 2022.
This action protected the company from lawsuits it would have faced while subjecting it to increased oversight from regulators.
Terraform Labs Exposure Was The Main Culprit
As stated by Hodlnaut’s management – who reportedly destroyed multiple documents revealing the full scale of their exposure to Terraform Labs – the primary factor behind their downfall was the significant amount of assets they had allocated to the latter. As previously noted by CryptoPotato, Hodlnaut had approximately $190 million invested in UST.
After attempting to stabilize the platform, Hodlnaut’s management ultimately declared insolvency and entered judicial management, indicating from the outset their intention to restructure the platform and revive it.
Regrettably for them, the essential component for restructuring, specifically new funding, did not materialize.
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Earlier this year, it became evident that creditors had little optimism regarding the revival of Hodlnaut and would rather recover at least a portion of their assets through liquidation.
However, a recent document released by advisors Ernst&Young verifies that any restructuring effort is “unlikely to be achievable.”
The document confirms that, despite Hodlnaut’s diligent attempts, the firm has been unable to identify a potential investor capable of providing the liquidity necessary for its recovery.
Additionally, the report indicates that creditors holding the majority of the claims – approximately 55.38% – voted in favor of complete liquidation. Those advocating for a restructuring solution control only 2.42% of the claims against Hodlnaut, a significant portion of which appears to be held by the company’s own directors.
Consequently, the courts have decided to favor liquidation if the situation does not change.
“Counsel for Mr. Simon Eric Lee confirmed that there was no fresh injection of funds available. In the circumstances, the Court held that it was not satisfied that a potential compromise and/or arrangement could be approved without a fresh injection of funds and thus directed that the IJMs are to proceed with filing a petition to wind up the Company with a concurrent application to discharge themselves as IJMs.”
The mediation proposal faced strong opposition, particularly from major creditors such as Samtrade Custodian and the Algorand Foundation, the latter having suffered significant losses from the failures of both 3AC and Hodlnaut.
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