Hodlnaut Creditors Want Liquidation, Spurning Management’s Restructuring Solution

Hodlnaut, a crypto lending platform that went under due to crypto winter, has been under judicial management since August 2022.

This decision shielded the firm from lawsuits that it would have had to deal with in return for far greater scrutiny from regulators.

Terraform Labs Exposure Was The Main Culprit

According to Hodlnaut’s leadership – who allegedly destroyed several documents indicating the full extent of their exposure to Terraform Labs – the main reason for their fall was the number of assets that they had invested in the latter. As previously reported by CryptoPotato, Hodlnaut had around $190 million invested into UST.

After trying to keep the platform afloat, Hodlnaut management eventually declared insolvency and placed themselves under judicial management, stating from the get-go that they plan to restructure the platform and bring it back.

Unfortunately for them, the crucial element for restructuring, namely fresh funding, failed to materialize.

No Silver Lining

Earlier this year, it was already clear that creditors did not see much hope in the resurrection of Hodlnaut and would prefer to recoup at least some of their assets following liquidation.

However, a new document published by advisors Ernst&Young confirms that any restructuring process is “unlikely to be achievable.”

The document confirms that, despite Hodlnaut’s best efforts, the firm has not been able to find a prospective investor that could provide the liquidity that would bring it afloat again.

Furthermore, the paper reveals that the creditors holding the lion’s share of the claims – about 55.38% – voted in favor of total liquidation. The creditors preferring a restructuring solution only control 2.42% of the claims against Hodlnaut, a large part of which appear to be actually controlled by the directors of the company itself.

As a result, the courts have opted to move in favor of liquidation should circumstances remain unchanged.

“Counsel for Mr. Simon Eric Lee confirmed that there was no fresh injection of funds available. In the circumstances, the Court held that it was not satisfied that a potential compromise and/or arrangement could be approved without a fresh injection of funds and thus directed that the IJMs are to proceed with filing a petition to wind up the Company with a concurrent application to discharge themselves as IJMs.”

The mediation proposal was vehemently opposed, especially by large creditors such as Samtrade Custodian and the Algorand Foundation, the latter having taken a large hit from the collapse of both 3AC and Hodlnaut.