Protection file

Hodlnaut under creditor protection following halt in withdrawals

Hodlnaut is one of the latest companies to grapple with insolvency issues. The crypto winter of the year dealt a terrible blow to several crypto-related companies and service providers. Some have tried different approaches that could reduce their expenses. This has led some companies to lay off some employees to reduce their cost per head.

Hodlnaut, the crypto credit company, was on the verge of bankruptcy. This prompted the company to file for judicial management to fight against a possible forced liquidation.

Following its filing, the Singapore-based firm has obtained the desired approval and is currently under interim judicial management. The Singapore court approved on August 29, which now offers a creditor protection program to Hodlnaut.

With the Creditor Protection Program, Hodlnaut has full coverage of Singapore law. According to the law, companies with financial problems are allowed to rehabilitate with external pressure from any foreigner.

Additionally, the court will appoint an officer known as the Judicial Director to oversee the management of the troubled business. This means that the leader takes over from the entrepreneur within the time allowed for rehabilitation.

For the past three weeks, the crypto lending company has frozen withdrawals from its platform and other trading activity. The company said the action was due to a liquidity crunch due to the crypto winter in the broader market.

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Following court approval, Hodlnaut published an official blog post on August 30 to inform its users of the changes. The message quoted the interim judicial directors appointed for the firm as Aaron Loh Cheng Lee and Ee Meng Yen Angela, care of Ey Corporate Advisors.

Hodlnaut’s previous moves to stay afloat

Some crypto lending firms have suffered from the crypto contagion that erupted after the algorithmic stablecoin TerraUSD (UST) collapsed.

The Terra ecosystem massively lost around $40 billion in the first half of the year as the network collapsed. Its downfall resulted in other companies having to plug into the stablecoin, with the spread becoming fuller over time. As a result, Hodlnaut finds himself caught in the web of bankruptcy.

While trying to fight insolvency, Hodlnaut laid off around 80% of its employees earlier this month. This action predated the firm’s decision to seek judicial management.

As a result, the company predicted that it could reduce its asset-to-debt ratio to 1:1. Such a move would have allowed the company to allow the withdrawal of crypto token deposits by its users.

After freezing withdrawals on its platform, Hodlnaut is considering reactivating withdrawals. His idea was for users to withdraw both initial deposits and accrued interest. Then the firm could finally close the accounts. But such a plan can only be realized if judicial officials approve it.

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