17,000 Creditors Await Fate in Hodlnaut’s Liquidation Crisis
In Singapore, cryptocurrency lending platform Hodlnaut is facing imminent liquidation, as revealed by recent court filings dated November 10.
The company, which also has operations in Hong Kong, had earlier paused withdrawals and sought creditor protection, but these measures have failed to prevent the looming liquidation.
Transition from Judicial Management to Liquidation
The recent developments in the Hodlnaut case mark a significant shift in the company’s trajectory. Initially, Ms. Ee Meng Yen Angela and Mr. Aaron Loh Cheng Lee were appointed as the Interim Judicial Managers (IJMs) for Hodlnaut in August 2022.
Their role was to oversee the company’s operations and attempt a recovery during its financial distress. However, a turning point came on November 10, when the High Court of Singapore decided to discharge the IJM Order, effectively ending their tenure as IJMs.
Following this decision, the High Court took a further step by appointing the same individuals, Ms. Ee and Mr. Loh, as the joint and several company liquidators under the Winding-Up Order. The liquidators’ role will now focus on winding up the company’s affairs, which involves liquidating assets and distributing the proceeds to creditors.
Managing Creditor Concerns Amid Liquidation
In the wake of Hodlnaut’s liquidation process, the newly appointed liquidators face the challenging task of addressing the concerns of a vast number of creditors.
With over 17,000 platform users listed as creditors, the liquidators have acknowledged the impracticality and cost-ineffectiveness of responding to individual queries.
To efficiently manage communication, the liquidators have committed to consolidating responses to common queries in their regular updates.
These updates are set to be communicated to all potential creditors, ensuring that relevant and essential information is disseminated in a streamlined and accessible manner.
The decision to provide regular updates via email and on Hodlnaut’s official website is a strategic approach to keeping creditors informed about the ongoing liquidation proceedings and any significant developments.
Creditors Reject Restructuring in Favor of Liquidation
The path to liquidation for Hodlnaut was set when its key creditors overwhelmingly rejected a proposed restructuring plan. This decisive turn of events was driven by the creditors’ belief that liquidating the company would be the most effective way to maximize the value of its remaining assets for distribution.
The proposed restructuring plan faced significant hurdles, particularly due to a contentious provision. This provision would have allowed the directors, who were at the helm during Hodlnaut’s financial troubles, to continue in their management roles.
This aspect of the plan was a major point of contention for creditors, especially in light of ongoing investigations into the company and its directors.
Singapore’s police force announced in November that they were investigating Hodlnaut and its directors for possible cheating and fraud. This investigation added another layer of complexity to the situation, contributing to the creditors’ reluctance to accept a restructuring plan that would keep the current management in place.
The combination of the ongoing legal investigation and the creditors’ lack of confidence in the existing management led to a strong preference for liquidation.
Hodlnaut’s financial crisis can be traced back to its significant exposure to the collapse of the Terra digital-token ecosystem, led by Do Kwon. The company incurred a substantial loss of around $190 million amid the downturn in the digital asset market.
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