Algorand disclosed investments worth $35 million in troubled crypto lender Hodlnaut
The Algorand Foundation has revealed that it has invested $35 million in USD Coin (USDC) in beleaguered crypto lender Hodlnaut.
The cryptocurrency lending firm had stopped its withdrawals earlier last month.
Algorand is a blockchain infrastructure that has built-in smart contract functionality.
The foundation is a non-profit community organization that has focused its efforts on the development of the Algorand ecosystem.
It supports the blockchain and also monitors its overall development.
According to a statement provided by Algorand on its website, it supposedly mentions that these funds make up less than 3% of its total assets.
That said, it clarified that the investment will not result in any “operational or liquidity crisis” for the Algorand Foundation.
The announcement appeared on the Algorand Foundation website a few days ago, where the foundation stated that it is “pursuing all legal remedies to maximize asset recovery.”
The situation of crypto lender Hodlnaut became difficult during the market downturn
The financial situation of the crypto-lender spun after the investments worth $300 million in TerraUSD (UST) on the Anchor protocol just crashed.
This happened due to the de-pegging of UST and also the collapse of the Luna Classic (LUNC) token, which resulted in Hodlnaut even stopping their withdrawals.
They also stopped trading activities. The reason was a liquidity crisis.
A few weeks later, following the withdrawal stop incident, Hodlnaut had been placed under temporary legal administration, which is a form of creditor protection program, by the court in Singapore.
Hodlnaut was one of the many fintech companies hit hard by the crypto carnage.
In the second week of August 2022, Hodlnaut applied to be placed under judicial management. This is five days after withdrawals were paused.
Legal management involves debt restructuring, which allows an entity to manage the business, property and assets of a troubled company.
In this process, the company will receive protection against legal proceedings from third parties.
Algorand’s investments were short-lived
The investments in Hodlnuat were short-term locked deposits. However, the suspension of withdrawals from the crypto lending platform has made these investments unavailable.
The company has mentioned that it is legally trying to retrieve these funds.
Part of this effort has led to the appointment of Algorand Foundation nominees as interim receivers to “identify, preserve and protect Hodlnaut’s assets pending the commencement of further litigation.”
Algorand also happens to be exposed to bankrupt crypto hedge fund Three Arrows Capital.
According to the court documents, the foundation was reported to have been involved in a one-off OTC trade with a hedge fund, but 3AC had breached the terms of the lock-up.
In other news, Algorand Network recently completed an upgrade that significantly increased network capacity.
Proof of government was also added to the network as part of this upgrade.
