Embattled cryptocurrency lender Hodlnaut disclosed a roughly $200 million cash shortfall.
The reasons why the business froze withdrawals on August 8 are detailed in the affidavit supporting Hodlnaut’s application to be placed under judicial control, which was submitted on August 12.
Customers were given access to the document after the business said in a blog post on August 19 that it is being investigated by Singaporean authorities and that it has laid off 80% of its workers in order to save money. The accounting information is current as of August 8.
According to the affidavit, Hodlnaut has assets of SGD 122 million ($88 million), an outstanding liability of SGD 391 million ($281 million), and a deficiency of about $193 million.
“The Hodlnaut Group had an outstanding obligation amount of SGD 391M as of 8 August 2022, and it was estimated that it had realisable assets in cryptocurrencies of SGD 122M. Due to its current financial standing, the Hodlnaut Group has a realisable asset-to-debt ratio of around 0.31 (or 31 cents on the dollar) “it declared.
As previously reported, the company requested time to address its financial problems by requesting creditor protection in Singapore on August 16.
According to the document, Hodlnaut used Anchor Protocol on Terra to store almost $317 million in UST, the defunct stablecoin, in order to pass large dividends on to its users. According to the affidavit, Hodlnaut sustained losses of $189.7 million in May as a result of Terra’s stablecoin UST’s abrupt de-peg from the dollar. These specifics were released to the public early last week.
Then, between June 14 and July 15, Holdnaut experienced “higher than average net withdrawals” of about $150 million as frightened clients attempted to recoup their money, according to the report. Hodlnaut added that the general market decrease had an impact on its holdings of ether (ETH) and bitcoin (BTC).
According to the document, Hodlnaut has 17,513 potential creditors, which are those “users who have actually placed Tokens and who are likely to be creditors.” At its height in March of this year, the company was in charge of $750 million.
Hodlnaut is exploring the option of allowing “limited exits” for users at 25 cents on the dollar, according to the affidavit. The company is already in talks with liquidity providers such as FTX, the crypto exchange, about the feasibility of the proposal, it said.
Hodlnaut positioned that plan as a better outcome for clients than its liquidation
“This would likely be a better option than liquidation as the latter would take a longer period of time, and likely result in a lower return than 25 cents on the dollar given the fees involved in a liquidation situation and given the present cryptocurrency asset to debt ratio of the Hodlnaut Group,” the company said.
By highlighting the “buoyancy” of the cryptocurrency market and the fact that it has been profitable since its start in 2019 — despite the UST exposure — the firm made it clear that it is not now in liquidation and that it can envision generating reliable profits in the future.
After Terra’s demise, Hodlnaut made an effort to comfort worried clients. On June 13, the company sent a single email to users in which it discussed the current status of the cryptocurrency market.
“Hodlnaut practices sound risk management policies. Despite the current volatile conditions, all Hodlnaut products & services remain unaffected and are fully operational, including interest payouts, token swaps, deposits and most importantly, withdrawals,” it said. “We take risk management in the company very seriously and utmost responsibility to customer assets and stakeholders is always at the top of our priority.”
Hodlnaut was asked for comment regarding the affidavit’s content but had not returned by the time of publication.
Not only Hodlonaut, but other businesses situated in Singapore are having financial issues. Both the cryptocurrency exchange Zipmex and the lending platform Vauld have applied for creditor protection in the nation. Babel Finance and Celsius are two struggling companies that Zipmex is exposed to to the tune of $53 million. Vauld, on the other hand, owes its creditors more than $400 million.
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