Judicial Management Likely for Hodlnaut; Forced Liquidation Possible

Singapore-based crypto lending platform Hodlnaut has filed an application with the Singapore High Court to be placed under judicial management.

In an email to users on Tuesday, Hodlnaut said it is “working closely” with lawyers and have weighed various available options for its next steps, adding that it took this move as it wants to avoid a forced liquidation of assets.

Liquidation would require Hodlnaut to sell its users’ cryptocurrencies at current depressed asset prices. “We believe that undergoing judicial management would provide the best chance of recovery,” Hodlnaut said.

Judicial management is similar to Chapter 11 bankruptcy in the US, meaning the platform is insolvent but will attempt to continue operations to hopefully recover over time.

However, it is unclear how Hodlnaut aims to make its users whole again. If it waits for a bull market – and even this is uncertain – and asset prices appreciate, the platform would have to buy ETH/BTC at higher prices to pay users back for their holdings.

Collateral damage

Earlier this month, Hodlnaut, which claimed to have US$500 million AUM at the start of 2022, paused customer withdrawals, citing “recent market conditions.” It also withdrew its application for a digital payment token (DPT) license from the Monetary Authority of Singapore.

According to an earlier CoinDesk report, the lender is working with Singapore-based law firm Damodara Ong. The next update from the platform is expected on August 19.