The Singapore-based lender stopped withdrawals earlier in the month and filed for creditor protection. Last week’s affidavit shows how exposed it is to UST, the failing stablecoin, as well as the extent of its financial hardship.
Hodlnaut, a troubled crypto lender, reported a financial shortfall of nearly $200 million in a court filing earlier this month that was obtained by The Block.
The August 12 affidavit supporting Hodlnaut’s request to be under judicial management outlines exactly what caused the company to stop withdrawals in August 8.
The document was made available to customers after the company published a blog posting on August 19, confirming that it is under police investigation in Singapore and that it had laid off 80% its staff to save cash. Dated August 8, the financial data can be found here.
According to the affidavit, Hodlnaut is currently liable for SGD 391 million (around 281 million), and has assets of SGD 122 million ($88 million). This leaves a deficit of approximately $193 million. “The Hodlnaut Group’s outstanding liability balance is SGD 391M, with estimated realisable assets at SGD 122M. This information was updated on 8 August 2022. The Hodlnaut Group’s financial situation gives rise to a cryptocurrency Asset-to-Debt ratio of 0.31 (ie. It stated that 31 cents per dollar is the average.
As reported previously, the company applied for creditor protection in Singapore to help it resolve its financial problems.
According to the document, Hodlnaut parked $317 million in UST (the failed stablecoin) in Anchor Protocol on Terra in order to pass high yields to its customers. According to the affidavit, Hodlnaut suffered losses of $189.7 millions when Terra’s stablecoin, UST , was sharply de-pegged against the dollar in May. These details were made public last week.
According to the document, Holdnaut experienced “greater-than-usual net outflows” in June 14-15, when panicked customers tried to recover their funds. Hodlnaut claimed that its bitcoin (BTC), and ether (ETH), holdings were also affected by the wider market decline.
The document also indicated that Hodlnaut’s potential creditors — which are users who have actually made deposits of Tokens and are likely to become creditors — was 17,513. At its peak, in March 2013, the firm had $750 million.
According to the affidavit, Hodlnaut is looking into the possibility of allowing users “limited exits” at 25 cents per dollar. According to the company, they are already in discussions with liquidity providers like FTX, the cryptocurrency exchange, regarding the feasibility of the proposal.
Hodlnaut stated that this plan would be a better option for clients than liquidation in the affidavit. The company stated that liquidation would be more expensive and take longer than this plan. It would also likely have a lower return than 25c on the dollar due to the costs involved and the current cryptocurrency asset-to-debt ratio of the Hodlnaut Group.
The company clarified that it isn’t currently in liquidation. It stated that it can envision delivering stable returns in future. Citing the “buoyancy of the crypto market” and the fact that it was profitable since launching it in 2019, despite the UST exposure, the company said that they are not in liquidation.
Hodlnaut tried to comfort customers who were concerned in the months following the fall of Terra. Hodlnaut addressed crypto market conditions in one email sent to customers on June 13.
“Hodlnaut has sound risk management practices. It stated that despite the volatile current conditions, all Hodlnaut products and services are unaffected and remain fully operational including interest payouts and token swaps. Deposits and, most importantly, withdrawals. “We take risk management very seriously in the company and the highest priority is to customers assets and stakeholders.
Hodlnaut was not available for comment when we tried to reach him about the contents of the affidavit.
Hodlonaut, a Singapore-based company, is not the only one facing financial difficulties. The country’s crypto exchange Zipmex, and the crypto lender Vauld, have both sought creditor protection. Zipmex is exposed to $53 million by troubled companies Celsius and Babel Finance. Vauld, however, owes its creditors more than $400million , according to The Block.