Creditors of Hodlnaut have rejected the company’s restructuring solution and are calling for liquidation instead. Hodlnaut is a cryptocurrency lending platform that suffered a hack that resulted in the theft of 3,000 ETH. The company’s management had proposed a restructuring plan that would have allowed creditors to receive partial repayment over time, but creditors have opted for liquidation, which would result in the sale of all assets to repay debts. The situation highlights the challenges faced by companies following a security breach and the difficult decisions that must be made by both management and the affected parties.
Hodlnaut: The Failure of a Crypto Lending Platform
Hodlnaut was a cryptocurrency lending platform that failed during the crypto winter and has been under judicial management since August 2022. The decision to undergo judicial management was made to protect the firm from lawsuits and regulatory scrutiny that would have been faced otherwise.
According to Hodlnaut’s leadership, the main reason for their downfall was their exposure to Terraform Labs, with the firm allegedly destroying documents indicating the full extent of the exposure. As previously reported by CryptoPotato, Hodlnaut had around $190 million invested in UST, and after trying to keep the platform afloat, management eventually declared insolvency and placed themselves under judicial management. They planned to restructure the platform and bring it back, but unfortunately, fresh funding failed to materialize.
Earlier this year, creditors already saw little hope in the resurrection of Hodlnaut and preferred to recoup at least some of their assets through liquidation. A new document published by advisors Ernst&Young confirms that any restructuring process is unlikely to be achievable. The document further revealed that despite Hodlnaut’s best efforts, the firm has not been able to find a prospective investor that could provide the liquidity needed to revive the platform.
Furthermore, the paper confirms that creditors holding the majority of the claims voted in favor of total liquidation. As a result, the courts have opted to move in favor of liquidation unless there is a change in circumstances.
The mediation proposal was opposed, especially by large creditors such as Samtrade Custodian and the Algorand Foundation. The latter suffered significant losses from the collapse of both 3AC and Hodlnaut.
In conclusion, Hodlnaut’s failure reminds us of the risks involved in investing in the crypto industry. Investors and companies alike must approach the market with caution and carefully assess the risks before investing or launching new projects.