Crypto Lender Hodlnaut Needs Judicial Management to Shield Itself from Creditors

Crypto Lender Hodlnaut Needs Judicial Management to Shield Itself from Creditors

Hodlnaut, a Singapore-based platform for crypto lending, is looking for judicial management to handle its ongoing liquidity crisis and prevent forced asset sales.

Need Time to Restructure

After freezing deposits and withdrawals on August 8th, crypto lender HodInaut, on August 16th, announced applying to the Singapore High Court to be placed under judicial management.

Hodlnaut has suggested Tam Chee Chong as the interim and ultimately judicial manager. Tam Chee Chong is the director of the financial consulting business Kairos Corporate Advisory.

According to the company, Chong has over four decades of experience in corporate financial counseling. He has served as a judicial manager for several businesses undergoing reorganization.

The firm has set August 19th as the next deadline for further updates on its judicial management application as the court has not yet heard the application.

However, the company is optimistic about the judicial management possibility. In the official announcement, the company wrote:

"We aim to avoid a forced liquidation of our assets as a suboptimal solution that will require us to sell our users' cryptocurrencies such as BTC, ETH, and WBTC at these current depressed asset prices. Instead, we believe that undergoing judicial management would provide the best chance of recovery."

Singaporean Law Offers Temporal Protection

Judicial management is a law in Singapore that allows financially troubled firms to rehabilitate, which the company believes would provide breathing room to focus on its recovery plan.

Under this law, the court appoints an officer called the judicial manager for the troubled firm who takes over charge from the company’s director for the time being. The appointment of a judicial manager can take up to a few months.

Until the court confirms, the company may apply to appoint an interim judicial manager to act temporarily in the same capacity.

On the Flipside

Hodlnaut became one of the many cryptocurrency lenders to succumb to the crash brought on by the collapse of TerraUSD Classic (USTC) and fueled by the bankruptcy of multi-billion dollar cryptocurrency hedge fund Three Arrows Capital. Even though Hodlnaut avoided any Three Arrows Capital exposure, numerous reports and on-chain data indicate the company once had around $150 million in USTC.

Why You Should Care

Many crypto lenders and exchanges suffered during the crypto market crash and a bear market. The centralized crypto platforms might raise the risks to the user’s funds, as the firms can manage investors’ assets to make risky bets.

There is no guarantee investors would be able to recover their money if an exchange were to freeze someone’s account or, worse yet, go bankrupt. This is because there are no regulations controlling crypto-assets.

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