Crypto lender Hodlnaut applies for judicial management to avoid forced liquidation of its business

SINGAPORE - Beleaguered crypto lender Hodlnaut on Saturday (Aug 13) filed an application with the High Court to be placed under judicial management, the company announced in a statement on Tuesday.

It added that judicial management would provide the best chance of recovery.

"We are aiming to avoid a forced liquidation of our assets as it is a suboptimal solution that will require us to sell our users' cryptocurrencies such as Bitcoin, Ether and Wrapped Bitcoin at these current depressed asset prices," Hodlnaut said.

Judicial management is a mechanism under Singapore law for companies under financial distress to rehabilitate their business.

If granted, it will provide a temporary pause on legal claims and proceedings against Hodlnaut.

"This pause will provide us with the breathing space to focus our efforts on the recovery plan to rehabilitate the company," the company said, without elaborating on what the recovery plan entails.

The move comes after a string of bankruptcies in the crypto sphere, including those of hedge fund Three Arrows Capital and lender Celsius Network.

Aside from Hodlnaut, brokerage Voyager Digital and exchange Zipmex had also filed for bankruptcy protection.

The High Court has since given Zipmex a three-month extension of its moratorium shielding Zipmex Asia and key operating subsidiaries from potential creditor lawsuits.

"While Hodlnaut is facing a difficult financial situation at the moment, not all your assets are gone. As it stands, as we have halted all withdrawals, no user will receive priority in withdrawals," the crypto lender said.

Hodlnaut added that it has applied for a judicial manager, who will help in the restructuring of the company and in determining a definite date for re-enabling withdrawals.

Hodlnaut has applied for Mr Tam Chee Chong of Kairos Corporate Advisory to be appointed as its interim judicial manager and, subsequently, judicial manager.

Mr Tam has more than 37 years of corporate and financial advisory experience, including as judicial manager in various companies that underwent restructuring.

The timeline for a judicial manager to be appointed by the High Court may take up to a few months.

Hodlnaut on Aug 8 froze withdrawals and withdrew its application for a licence to provide digital payment token services in Singapore, citing recent market conditions and the need to focus on stabilising its liquidity and preserving assets.

Since hitting an all time high of US$69,000 ($95,000) in November last year, Bitcoin has lost close to half its value.

The Monetary Authority of Singapore on Aug 9 rescinded Hodlnaut's in-principle approval to offer token swaps under the Payment Services Act. As a result, it will no longer be allowed to conduct regulated activities in Singapore.

Token swaps allow Hodlnaut's clients to instantaneously swap one cryptocurrency for another without having to exchange crypto for legal tender in the process.

The company will provide further updates on the judicial management process on Aug 19.