Troubled lender Hodlnaut seeks creditor protection in Singapore

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A digital asset company is taking excessive risk with its users’ funds. He gets ‘rekt’ and stops withdrawals. He then runs to court to protect himself from his creditors. Sound familiar? Well, that’s because it is. The latest to go down this path is Hodlnaut, a digital asset lender who appeared in a Singapore court seeking respite to settle his mess.

Hodlnaut announced on August 8 that it had suspended withdrawals, an action that has become an ominous sign of impending doom for VASPs. In his announcement, he revealed that he was also halting token deposits and trading, blaming “recent market conditions” for his predicament.

Just a week later, Hodlnaut ran to court to protect himself from his creditors.

“…effective August 13, 2022, Hodlnaut Pte Ltd has filed an application with the High Court of Singapore to be placed in receivership,” reads this week’s announcement.

The firm reason that being placed in receivership will protect it from being forced to sell its users’ digital assets at their “current depressed prices”.

If the Singapore court grants creditor protection to Hodlnaut, the company will be given a few months to sort out its problem. During this time, he can determine how much money he owes his users and how much he currently owns. If the two numbers don’t match (and they won’t), he’ll explore different ways to fundraise to make up the shortfall.

Digital currency companies going to court seeking creditor protection are becoming more common, especially in Singapore. In the past month, two more VASPs have filed for and been granted protection after losing millions of dollars in investor funds.

The latest is Zipmex which was given nearly four months to sort out its damage. Previously, Peter Thiel-backed lender Vauld was granted three-month protection after its bet on collapsed Terra ecosystem tokens – UST and LUNA – led to its implosion.

Hodlnaut has offered Tam Chee Chong, a former Deloitte Southeast Asia partner and current director of Kairos Corporate Advisory, to serve as interim chief judicial officer as the company awaits a court verdict.

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