Sebastian Sinclair

Interim judicial managers of distressed Singapore-based crypto lender Hodlnaut have begun fielding inquiries from prospective buyers and its claims against bankrupt exchange FTX.



The managers are reportedly negotiating non-disclosure agreements with the buyers, Bloomberg <a href="https://www.bloomberg.com/news/articles/2023-02-06/potential-buyers-circle-ailing-singapore-crypto-firm-hodlnaut-and-its-ftx-claims" target="_blank" rel="noreferrer noopener">reported</a> Monday, without naming who those buyers are.



It follows a little under three weeks since the rejection of a proposed restructuring plan was floated to creditors, who are instead pushing for the lender’s liquidation.



Hodlnaut, which also has operations in Hong Kong, owes roughly $160 million to various creditors representing 62% of its outstanding debt, per the report.&nbsp;



Around 72% of Hodlnaut’s digital assets deployed to centralized exchanges are held on FTX including 514 bitcoin, 1,395 ether, as well as about 1,000 FTT tokens and 280,000 USDC.&nbsp;



FTT, the native token of FTX, has shed roughly 94% of its value following the exchange’s collapse at the start of November. That means creditors are only able to claim pennies on the dollar of FTT’s original value.



Some of those creditors include the Algorand Foundation, Hodlnaut’s custodian Samtrade, S.A.M. Fintech and software engineer Jean-Marc Tremeaux. All four did not immediately respond to a request for comment.



The lender fell on hard times midway through last year, opting to freeze withdrawals, token swaps and deposits in what it viewed as <a href="https://blockworks.co/news/crypto-lender-hodlnaut-freezes-withdrawals-pulls-singapore-application">an attempt to stabilize liquidity</a> and preserve assets.



A week later, Hodlnaut <a href="https://blockworks.co/news/crypto-lender-hodlnaut-cuts-80-of-staff-amid-police-investigation">slashed its headcount by 80%</a>, or roughly 40 employees, attempting to lower expenses with those staying behind tasked with carrying out its key functions.



Its decision to reduce its workforce also came amid an investigation by Singapore police into the lender and its directors’ dealings with a “<a href="https://www.police.gov.sg/media-room/news/20221123_inv_into_hodlnaut_pte_ltd" target="_blank" rel="noreferrer noopener">certain digital token</a>” for potential cheating and fraud offenses.



At the time, Singapore police <a href="https://www.straitstimes.com/business/invest/crypto-lender-hodlnaut-fights-singapore-police-order-as-it-faces-opposition-to-judicial-manager-candidate" target="_blank" rel="noreferrer noopener">issued an order</a> for Hodlnaut to hand over its balance assets, which totaled $127 million worth of stablecoins USD Coin (USDC) and Tether (USDT).



A Hodlnaut spokesperson did not immediately respond to a request for comment.



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Hodlnaut Hunts for Buyer, Creditors Want Liquidation

Shalini Nagarajan

<div id="highlights-block_62ffc4ceefab4" class="highlights">
 <ul>
 <li>Hodlnaut has laid off 40 employees to lower expenses</li>
 <li>Losses suffered by the firm’s Hong Kong subsidiary during the TerraUSD crash hurt its business</li>
 </ul>
 
</div>



Singapore-based cryptocurrency lender Hodlnaut is laying off most of its staff and announced “pending proceedings” with local police.



The firm said in an <a href="https://www.hodlnaut.com/press/an-update-on-our-ijm-process" target="_blank" rel="noreferrer noopener">update</a> on Friday that it is handling inquiries from the Singapore attorney general and the police force, without providing further details. Crypto regulation in the city-state is likely to get tougher as the central bank <a href="https://cms.blockworks.co/singapore-mulls-limits-on-retail-traders-leverage-after-crypto-collapse/" target="_blank" rel="noreferrer noopener">mulls new rules</a> on retail participation.  



Hodlnaut decided to slash its headcount by 80%, or about 40 employees, to lower expenses. The retained team is required to carry out key functions, it said.



Last week, the lender <a href="https://www.hodlnaut.com/press/an-update-for-our-users" target="_blank" rel="noreferrer noopener">filed</a> for a form of debt restructuring called judicial management after <a href="https://cms.blockworks.co/crypto-lender-hodlnaut-freezes-withdrawals-pulls-singapore-application/" target="_blank" rel="noreferrer noopener">freezing withdrawals</a> on its platform.



Hodlnaut said judicial management is what will “most benefit” users in the long run, as it would avoid liquidations of the firm’s bitcoin and ether holdings at current low prices.



Under the procedure, an independent officer is appointed to replace company directors and manage business affairs.



Meanwhile, its founders are in Singapore and working on the recovery plan. The plan, it says, is aimed at restoring Hodlnaut’s asset-to-debt ratio and allowing users to withdraw their funds at the full value of the deposited crypto. To stabilize liquidity, the company will cut all open-term interest rates to 0% from Aug. 22 at 5:00 pm Singapore time.&nbsp;



Hodlnaut is among a slew of crypto lenders hurt by the market rout. It attributed its current position to losses suffered by the firm’s Hong Kong subsidiary during the TerraUSD crash and “issues relating to certain user(s) who have deposited substantial amounts of cryptocurrency with Hodlnaut.”



It added that <a href="https://cms.blockworks.co/tag/celsius/" target="_blank" rel="noreferrer noopener">bankrupt lender Celsius</a> hasn’t borrowed or lent to Hodlnaut. “Whilst Hodlnaut has an account with Celsius, Hodlnaut has not deposited any assets with Celsius,” the statement said. The firm also claims it has no secured creditors.



The company’s next update is likely to be on Aug. 23.



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Crypto Lender Hodlnaut Cuts 80% of Staff Amid Police Investigation

<div id="highlights-block_62f0ea310c14b" class="highlights">
 <ul>
 <li>Law firm Damodara Ong is now working with Hodlnaut on a recovery plan</li>
 <li>The platform&#8217;s next update is scheduled on August 19 — two weeks from now</li>
 </ul>
 
</div>



Crypto lender Hodlnaut has frozen withdrawals, token swaps and deposits on its platform, in addition to withdrawing a license application with the Monetary Authority of Singapore (MAS).



Its withdrawal freeze was made to stabilize liquidity and preserve assets, the Singapore-based platform said in a <a href="https://www.hodlnaut.com/press/hodlnaut-message-to-our-users" target="_blank" rel="noreferrer noopener">statement</a> Monday.&nbsp;



“Hodlnaut is therefore no longer providing regulated digital payment token (DPT) services, &#8230; our token swap feature,” the firm said in its statement.



Cryptocurrency businesses in Singapore are required to register with the MAS to be granted permission to offer services. That’s why Hodlnaut is unable to support token swaps, a regulated business that facilitates crypto-to-crypto trading.&nbsp;



Hodlnaut is one of several crypto businesses in the lending space to have crumbled amid the market downturn triggered by TerraUSD’s crash and the subsequent collapse of Three Arrows Capital. <a href="https://www.techinasia.com/hodlnaut-187m-exposure-terra-collapse">Tech in Asia</a> reported Hodlnaut may have had a $187 million exposure to TerraUSD.



The firm said it’s engaging with Singapore-based law firm Damodara Ong on a recovery plan and expects to next provide an update on August 19.&nbsp;For now, it plans to continue paying interest to customers in order to minimize liabilities. 



<figure class="wp-block-embed is-type-rich is-provider-twitter wp-block-embed-twitter"><div class="wp-block-embed__wrapper">
<blockquote class="twitter-tweet" data-width="550" data-dnt="true">Dear users, we regret to inform you that we will be halting withdrawals, token swaps and deposits immediately due to recent market conditions. We have also withdrawn our MAS licence application. Here is our full statement <a href="https://t.co/5KfHUBzWsn">https://t.co/5KfHUBzWsn</a> Our next update will be on 19 Aug.&mdash; Hodlnaut (@hodlnautdotcom) <a href="https://twitter.com/hodlnautdotcom/status/1556583257159790592?ref_src=twsrc%5Etfw">August 8, 2022</a></blockquote><script async src="https://platform.twitter.com/widgets.js" charset="utf-8"></script>
</div></figure>



Hodlnaut last advertised up to 7.25% annual percentage yield on various cryptocurrencies, with its highest rates offered on stablecoins USD coin and tether. Users can now only view their balances, according to a blog post.



&#8220;We apologise that we are unable to facilitate any withdrawal of funds at this juncture. We believe that this will provide us with the necessary breathing room to explore potential restructuring options and recovery plans with our legal advisors,&#8221; wrote Hodlnaut.



Although, rarely have crypto lenders like Hodlnaut returned to full functionality quickly. Voyager and Celsius users are still locked out of their accounts more than one month after their respectively platforms shut down. 



Both matters are now playing out in bankruptcy courts.



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Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



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