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An affidavit supporting Hodlnaut’s Aug. 12 referral motion lays out exactly what prompted the company to freeze the Aug. 8 withdrawal.
The document was provided to customers after the company published a blog post on August 19 confirming that it had been prosecuted in Singapore and that it had laid off 80% of its staff in order to save money. The financial data is dated August 8.
The affidavit said Hodlnaut’s outstanding debt is S$391 million (about $281 million) compared to assets of S$122 million ($88 million), resulting in a deficit of about $193 million. “As of August 8, 2022, Hodlnaut Group has an outstanding balance of liabilities of S$391 million and estimated realizable assets of S$122 million in cryptocurrency. This financial position gives Hodlnaut Group a ratio of realizable cryptocurrency assets to debt of about 0.31 (i.e. 31 cents per dollar),” the report said.
As previously reported, on August 16, the company applied for creditor protection in Singapore, trying to find time to solve its financial problems.
The document shows that Hodlnaut placed about $317 million in UST, a failed stablecoin, in the Anchor Protocol on Terra to pass on high returns to its customers. In May, the Stablecoin Terra UST broke sharply away from the dollar, causing Hodlnaut to suffer a loss of $189.7 million, according to affidavit. Those details were made public earlier last week.
Then, between June 14 and July 15, according to the document, Hodlnaut suffered a “greater than normal net outflow of funds” of about $150 million as panicked customers tried to recover their funds. Hodlnaut also stated that its assets in bitcoin (BTC) and ether (ETH) have been affected by the broader market decline.
The document also indicates the number of potential Hodlnaut lenders, defined as “users who actually deposited tokens and who may be lenders” – 17,513 people. At its peak in March of this year, the firm managed $750 million.
Hodlnaut is exploring the possibility of providing “limited exits” to users at a cost of 25 cents to the dollar, according to affidavit. The company is already in talks with liquidity providers, such as cryptocurrency exchange FTX, about the feasibility of the offer, the report said. In an affidavit, Hodlnaut positioned the plan as a better outcome for clients than liquidating it. “This is likely to be a better option than liquidation, as the latter will take a longer period of time and will likely result in a lower yield than 25 cents per dollar, given the fees associated with the liquidation situation and given the current asset of the cryptocurrency in debt. the ratio of Hodlnaut Group,” the company said in a statement.
The company explained that it is not currently being liquidated and can look forward to making stable profits in the future, citing the crypto market’s “survivability” and the fact that it has been profitable since launching in 2019 – despite its exposure to UST.
In the months following Terra’s collapse, Hodlnaut tried to reassure concerned customers. In one email to users dated June 13, the company addressed the state of the crypto market at the time.
“Hodlnaut adheres to a sound risk management policy. Despite the current volatile conditions, all Hodlnaut products and services remain valid and fully operational, including interest payments, token exchanges, deposits and, most importantly, withdrawals.” “We take risk management very seriously in the company and maximum responsibility to the assets of customers and stakeholders is always our top priority.”
Hodlonaut is not the only Singaporean firm facing financial difficulties. Cryptocurrency exchange Zipmex and crypto lender Vauld have also sought the protection of lenders in the country. Zipmex owns $53 million in assets from troubled firms Babel Finance and Celsius. Vault, on the other hand, owes its creditors more than $400 million.
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