Singapore-based crypto lender Hodlnaut has uncovered a $200 million financial shortfall as it seeks court protection.
Embattled crypto lender Hodlnaut disclosed in a court filing that it is suffering from a $193 million financial deficit earlier this month. That’s according to a report released by The Block earlier on Monday.
The statement revealed the circumstances that caused the company to freeze withdrawals on its platform on August 8.
The court documents were made available to clients after the crypto lender published a blog post on August 19 confirming that it is facing a police case in Singapore.
The company also laid off 80% of its employees to save cash. The affidavit revealed that Hodlnaut had outstanding debt of SGD 391 million (approximately $281 million).
Meanwhile, the company’s assets stood at SGD 122 million ($88 million), resulting in a financial deficit of approximately $193 million. The company said;
“As of August 8, 2022, Hodlnaut Group has an outstanding debt balance of SGD 391 million and an estimated SGD 122 million realizable assets in cryptocurrency. This financial situation gives the Hodlnaut Group a realizable cryptocurrency Asset/Debt ratio of about 0.31 (i.e., 31 cents per dollar).
Hodlnaut applied for creditor protection in Singapore on August 16 as he sought time to resolve his financial problems.
The financial struggles of the cryptocurrency lender began after the Terra crash. The company held approximately $317 million in UST, the stablecoin that failed the Anchor Protocol on Terra.
The UST stablecoin lost pegged value against the US Dollar in May, resulting in a loss of $189.7 million for Hodlnaut.
The company ran into more financial trouble between June 14 and July 15 as panic-stricken customers tried to regain their funds. Hodlnaught lost about $150 million at the time, according to the affidavit.
Hodlnaut also said that bitcoin (BTC) and ether (ETH) assets are currently affected by the bear market affecting the broader market.
The court affidavit also revealed that the number of potential creditors of Hodlnaut currently stands at 17,513.
The document said the company is looking at the option to allow “limited exits” for users at 25 cents on the dollar. The company added that Hodlnaut is in talks with FTX crypto exchanges about the proposal’s feasibility. Hodlnaut said:
“This would probably be a better option than liquidation, as the latter will take longer and will likely result in a return of less than 25 cents on the dollar, given the fees involved in a liquidation and the lending of existing cryptocurrency assets. . The proportion of the Hodlnaut Group.”
Several cryptocurrency lenders, including Celsius and Voyager Digital, have filed for bankruptcy following Terra’s collapse and the ongoing bear market.