Hodlnaut records nearly $200 million in a financial shortfall

Singapore-based crypto lender Hodlnaut has revealed a financial shortfall of $200 million as it seeks court protection.

Embattled crypto lender Hodlnaut revealed in a court affidavit filed earlier this month that it has suffered a financial shortfall of $193 million. This is according to a report by The Block earlier on Monday. 

The affidavit revealed the situations that led the company to freeze withdrawals on its platform on August 8.

The court documents were made available to customers after the crypto lender published a blog post on August 19 confirming that it is facing police proceedings in Singapore.

The company also laid off 80% of its staff in a bid to conserve cash. The affidavit revealed that Hodlnaut has an outstanding liability of SGD 391 million (around $281 million). 

Meanwhile, the company’s asset was SGD 122 million ($88 million), resulting in a financial shortfall of roughly $193 million. The company said;

“As of 8 August 2022, the Hodlnaut Group has an outstanding liability balance of SGD 391M and estimated realisable assets of SGD 122M in cryptocurrency. This financial position gives the Hodlnaut Group a realisable cryptocurrency Asset to Debt ratio of about 0.31 (i.e. 31 cents on the dollar).”

Hodlnaut already filed for creditor protection in Singapore on August 16 as it seeks time to resolve its financial issues.

The cryptocurrency lender’s financial struggles began following the Terra crash. The company held around  $317 million in UST, the failed stablecoin, in Anchor Protocol on Terra.

The UST stablecoin lost its peg against the US Dollar in May, resulting in a $189.7 million loss for Hodlnaut. 

The company suffered further financial afflictions between June 14 and July 15 as panicked customers sought to recover their funds. Hodlnaught lost around $150 million at the time, the affidavit added. 

Hodlnaut also said its bitcoin (BTC) and ether (ETH) holdings were affected by the bear market currently affecting the broader market. 

The court affidavit also revealed that the number of potential creditors of Hodlnaut currently stands at 17,513. 

The document said the company is looking at the option of allowing “limited exits” for users at 25 cents on the dollar. Hodlnaut is in talks with the FTX crypto exchanges about the feasibility of the proposal, the company added. Hodlnaut said;

“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.”

A few cryptocurrency lenders, including Celsius and Voyager Digital, have already filed for bankruptcy following Terra’s collapse and the ongoing bear market.