Algorand Foundation outlines $35 million exposure to crypto lender Hodlnaut

by · September 11, 2022

The Algorand Foundation has revealed a $35 million USDC hole in its balance sheet as a result of exposure to troubled lending firm Hodlnaut, which has halted withdrawals since August 8.

Algorand is an institutional-grade blockchain infrastructure with built-in smart contract functionality. The Algorand Foundation is a non-profit community organization focused on developing the Algorand ecosystem.

The announcement was made on the Algorand Foundation website on September 9, with the foundation stating that it is “pursuing all legal remedies to maximize asset recovery.”

Hodlnaut’s financial situation first fell into deep water when its $300 million investment in TerraUSD (UST) on the Anchor protocol fell dramatically following the de-pegging of UST and the collapse of the LUNA token, resulting in the crypto-lending firm halting withdrawals and halting all trading . activity, citing a liquidity crisis.

Weeks later, the firm was placed under interim legal administration, a form of creditor protection program, by the Singapore court.

The Algorand Foundation said the majority of investments locked on the platform consisted of “locked, short-term deposits” but are now unavailable due to Holdnaut’s suspension of withdrawals.

However, the Algorand Foundation notes that the $35 million represents less than 3% of the foundation’s assets, and they “do not anticipate [any arising] operational or liquidity problems,” adding that “the funds were a surplus for day-to-day needs”:

“We invest a portion of our excess capital to generate returns for Algorand’s ecosystem development, and these funds were invested for that purpose.”

Embattled crypto lender Hodlnaut is now under temporary legal management to resolve its liquidity issues.

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Under Singaporean jurisdiction, corporate entities are placed under interim legal management for debt restructuring purposes to preserve and protect assets at risk before legal action commences.

The Algorand Foundation has played a key role, noting that on August 29 the Singapore High Court appointed the foundation’s nominee Angela Ee along with Aaron Loh of EY Corporate Advisors to act as interim receivers of Hodlnaut, with the aim of preserving Hodlnaut’s assets pending further litigation starts.