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Crypto Lender Hodlnaut Lost Almost $190 Million in Terra Crash: Report

31 Oct, 20222 min readRegulation
Crypto Lender Hodlnaut Lost Almost $190 Million in Terra Crash: Report

A judicial report has reportedly revealed that crypto lender Hodlnaut lost around $189.7m due to its exposure to the Terra crash.

According to Bloomberg, the report, penned by interim judicial managers appointed by the Singapore High Court, alleged that Hodlnaut’s directors “downplayed the extent of the group’s exposure to Terra/Luna both during the period leading up to and following the Terra/Luna collapse in May 2022”.

The Singapore-based firm, founded in 2019, joins the likes of Celsius, Voyager Digital, and Three Arrows Capital, who were also devastated by exposure to the Terra ecosystem and its doomed algorithmic stablecoin UST.

The firm shuttered withdrawals in July 2022, citing “recent market conditions” and a focus on stabilizing its liquidity and “preserving assets”.

In August, the Singapore High Court appointed two employees from EY Corporate Advisors, Ee Meng Yen Angela and Aaron Loh Cheng Lee, to act as interim judicial managers (IJMs).

Per Bloomberg, the report also stated that more than 1,000 deleted documents from Hodlnaut’s Google Workspace could have helped shed light on the business, while the interim judicial managers have failed to obtain “key documents” relating to the firm’s Hong Kong arm, which owes around $58 million to its Singapore division.

The firm’s financial difficulties haven’t just impacted investors, Hodlnaut axed 80% of its staff, around 40 people, “to reduce the company’s expenditure” shortly after closing withdrawals.

The relationship between Hodlnaut and its administrators has been a bumpy one. Earlier this month, Hodlnaut founder Simon Lee petitioned the Singapore High Court to remove EY as its IJM, accusing the multinational consulting firm of dishonesty.

Singapore regulators and crypto

Singapore may soon be tightening up its regulations on crypto lending and staking, at least for retail investors, in the wake of several high-profile lenders collapsing.

The Monetary Authority of Singapore (MAS) has proposed in a new report that digital asset service providers “should not mortgage, charge, pledge or hypothecate the retail customer’s” crypto, with hypothecation referring to the process of using an asset as collateral in exchange for a loan.

But that’s not the only measure that the Asian city-state has put forth to protect investors from future losses.

Prospective investors may also be forced to pass a knowledge test before they can buy or sell digital assets, assessing whether or not they understand potential investment risks such as market volatility and technology failures.

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