The embattled crypto lender froze withdrawals on August 8, becoming the latest crypto firm affected by the crypto downturn, alongside Three Arrows Capital, Voyager Digital, Celsius Network, and Vauld. In its Friday announcement, Hodlnaut cited severe market conditions and losses inflicted by Terra’s UST stablecoin crash as the main causes of the company’s dire financial situation.
“Hodlnaut’s present financial circumstances are a result of losses suffered by Hodlnaut’s Hong Kong subsidiary during the TerraUSD crash, unusually high volumes of withdrawals, the overall decline in cryptocurrency prices from their 2021 highs and issues relating to certain user(s) who have deposited substantial amounts of cryptocurrency with Hodlnaut,” the blog post read.
To reduce its current expenditure, the company took drastic measures. The startup fired approximately 40 employees, who made up 80 percent of its workforce, it said in today’s update. “The current team that we have retained are, in our assessment, necessary headcount in order for us to carry out key functions,” Hodlnaut disclosed.
The company is also preparing to cut interest on deposits to zero, starting from August 22 at 5 pm Hong Kong time. However, to soften the blow for customers, Hodlnaut hinted it might allow users to withdraw their initial deposit, but the plan needs to be agreed upon first.
“Pertaining to the withdrawal option, it would entail users withdrawing the entirety of their account balance (with interest accrued up to the date of withdrawal), but with a haircut. After such a withdrawal, the user’s account with Hodlnaut will be closed. Do note that this plan and process is not confirmed at the moment, and is subject to review and approval by the judicial manager in the event that he is appointed.”
Hodlnaut applied for judicial management “in light of the Hodlnaut Group’s financial health.” The request is scheduled to be heard before the Singapore Court next Monday, and, if approved, would help avoid the liquidation of Hodlnaut’s BTC and ETH holdings at unfavorable prices. The appointment of a judicial manager would also provide Hodlnaut with the opportunity to carry out its recovery plan and revamp the struggling company.
Hodlnaut also disclosed it is engaged in proceedings with Singaporean authorities. The company, however, didn’t provide any meaningful details except the assurance that “these actions are taken in what we believe to be in the best interests of our users.”