Earlier this month Hodlnaut announced that they will be halting withdrawals, token swaps and deposits with immediate effect.
They just released a new update that they will be under interim judicial management. It also highlights what it means and how it will affect users on the platform.
How did Hodlnaut get to this stage?
According to the release, Hodlnaut’s current financial circumstances are a result of losses by its Hong Kong subsidiary, high volume of withdrawals and an overall decline in cryptocurrency prices.
Hodlnaut’s Hong Kong subsidiary suffered great losses during the Luna & UST episode where both assets crashed and burned.
The Celsius downfall also triggered a market-wide panic as investors began to lose faith in centralized saving platforms like Hodlnaut and started to withdraw from them.
The current bear market is also not helping as most assets are down bad and there are not a lot of new users joining.
According to Singapore legal advice judicial management is a method of debt restructuring where an independent judicial manager is appointed to manage the affairs, business and property of a company under financial distress. The company is also temporarily shielded from legal proceedings by third parties, giving it the opportunity to rehabilitate.
Hodlnaut applied to be placed under judicial management for two main reasons:
- To avoid liquidating at the current depressed price as user would likely only get a fraction of what was initially deposited.
- To gain time so that they are able to execute its recovery plan and restore its asset to debt ratio and eventually allowing users to withdraw full value.
Once appointed by the Singapore court, the judicial manager will take charge in place of the Directors and review all of Hodlnaut’s accounts and activities. The judicial manager will make the ultimate decision and also present a recovery plan to all creditors.
To further stabilise it’s current financial position, Hodlnaut would be changing all open term interest rates to flat 0% APR from 22 August, 5pm (GMT+8).
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: ChainDebrief