Crypto lender Hodlnaut seeks legal management to avoid compulsory liquidation
Singapore-based crypto-lending platform Hodlnaut is seeking legal guidance to address its ongoing liquidity crisis and avoid forced liquidation of assets in the current bear market.
The crypto lender informed users in a Tuesday announcement that it has applied to the Singapore High Court to be placed under judicial management. The firm said:
“We aim to avoid a forced liquidation of our assets as it is a sub-optimal solution that would 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 will provide the best chance for recovery.”
Judicial management is a law in Singapore that allows financially troubled firms to rehabilitate themselves. Under this Act, the court appoints an officer called the legal manager of the troubled firm who takes over the charge from the company’s director until further notice. The appointment of a presiding judge can take up to a few months. Until the court confirms it, the company can apply to appoint a temporary judge to act temporarily in the same capacity.
Hodlnaut has recommended Tam Chee Chong, director of financial consulting firm Kairos Corporate Advisory, as interim and then legal director. The crypto lender said Chong has nearly four decades of experience in corporate finance advisory and has taken on the role of a legal executive at various companies undergoing restructuring. The announcement read:
“With his experience and track record, we believe he will be able to execute our recovery plan and effectively restructure the business.”
The application has yet to be heard by the court and the firm has given August 19 as the next date for further updates on their application for court proceedings.
If approved, the law would also protect Hodlnaut from legal claims and lawsuits temporarily which the company believes will provide a “breathing space to focus our efforts on the recovery plan to rehabilitate the company.”
Related: The Celsius Network coin report shows a balance gap of $2.85 billion
Hodlnaut became one of the many crypto lenders to fall victim to the crypto contagion initiated by the Terra-USD collapse (UST) and fueled by the insolvency of crypto hedge fund Three Arrow Capital that had borrowed millions of dollars in multi-billion dollar loans. these crypto lenders. The crypto lender halted all trading activity along with deposits and withdrawals on August 8 citing market conditions and liquidity crisis.
Although Hodlnaut avoided 3AC exposure, multiple reports and chain data suggest that the firm at one point held about $150 million in UST. Hodlnaut did not respond to Cointelegraph’s requests for comment at press time.
