An update on our Interim Judicial Management / Judicial Management process

To our users, thank you for your patience. Following our update on 16 August 2022, we would like to take this opportunity to shed some light on what has happened in the past few months which got us to this point, and the path ahead. 

Why have we gone into Interim Judicial Management / Judicial Management?

We have applied to be placed under judicial management in light of the Hodlnaut Group’s financial health. 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. 

We believe that judicial management is the option which would most benefit our users now and in the long run. First, it would avoid liquidation of Hodlnaut’s holdings of BTC and ETH at today’s depressed prices (which have fallen greatly from their 2021 all-time highs). In the event of a liquidation, all assets of the company are sold first, and then distributed to our users equally in proportion to their holdings. What this would mean is that all users (whether you have deposited BTC, ETH or stablecoins) would likely only get back a fraction of what was initially deposited. 

Second, judicial management provides Hodlnaut with the opportunity to execute its recovery plan and rehabilitate the company. The plan is aimed at restoring our asset to debt ratio to at least 1 and eventually allowing users to withdraw the full value of their cryptocurrency deposited with Hodlnaut. If the Interim Judicial Manager, and subsequently the Judicial Manager, is appointed, he will step into the place of Hodlnaut’s management and make decisions on behalf and in the best interest of our users. 

We have heard you and understand that some of our users urgently need to access their funds. As such, we are also exploring the option of allowing users to withdraw their initial deposit, with interest accrued in full, at a discounted amount and close their account with Hodlnaut. However, as we are already applying for judicial management, this process will need to be reviewed and approved by the Judicial Manager in the event that he is appointed.

We have made a copy of our judicial management application and relevant accompanying affidavit available on our platform via the web app. All users who have an active account with us will be able to request for a copy of these documents on https://app.hodlnaut.com/fileshare. After a request is submitted, the user will receive the relevant document(s) via email. For users who have their residency in Singapore, we have also made a copy of the Notice to All Relevant Parties available at the same link. 

What does being under Interim Judicial Management mean for Hodlnaut and its users?

Once the Interim Judicial Manager has been appointed by the Singapore Court, he will step into the place of the Directors of Hodlnaut Pte Ltd. As such, he will review all of Hodlnaut’s accounts and activities, and have the ultimate decision-making power on all aspects of the company moving forward. We believe that he will also present a recovery plan to our creditors. 

What is the road ahead and what are the upcoming milestones?

In order to further stabilise our liquidity, we will be taking steps to reduce our burn rates. We will therefore be changing all open term interest rates to 0% APR from 22 August, 5pm (GMT+8). 

Since we halted withdrawals, we have also laid off 80% of our employees (being approximately 40 employees), in order to reduce the company’s expenditure. The current team that we have retained are, in our assessment, necessary headcount in order for us to carry out key functions. 

Finally, our legal representatives attended the first Case Conference for our Interim Judicial Management application on 18 August 2022. At this Case Conference, the Singapore Court has directed that subject to the Court’s availability, our application to be placed under Interim Judicial Management will tentatively be heard next Monday, 22 August 2022 at 2:30pm (GMT+8).

We understand that our users are facing a great deal of stress and uncertainty about the Judicial Management process. As such, we would like to share certain foreseeable milestones in the process for our users. Do note that the sequence of events described below are subject to change and the directions by the Singapore Court:

1. Hodlnaut Pte Ltd’s Interim Judicial Management application will be heard in the Singapore Courts. As mentioned above, this hearing is tentatively fixed for next Monday, 22 August 2022 at 2:30pm (GMT+8).
2. Assuming we are successful, an Interim Judicial Manager will be appointed by the Singapore Court. 
3. Once appointed, the Interim Judicial Manager will step into the place of the Directors of Hodlnaut Pte Ltd and decide how the company should be run.
4. The Interim Judicial Manager may then evaluate and propose a recovery plan to Hodlnaut Pte Ltd’s creditors to be voted on.
5. In the meantime, Hodlnaut Pte Ltd’s Judicial Management application will also be running in parallel. The next case conference for the Judicial Management application has been fixed for hearing on 30 August 2022 at 10:00am (GMT+8). 
6. Hodlnaut Pte Ltd’s Judicial Management application will be heard in the Singapore Courts. Assuming we are successful, Hodlnaut Pte Ltd’s Judicial Manager will be appointed by the Singapore Court.

Our next update will likely be on 23 August 2022 after our Interim Judicial Management application hearing on 22 August 2022. Our updates will be posted on https://www.hodlnaut.com/blog/news and communications will continue to be via email (support@hodlnaut.com), Twitter (@hodlnautdotcom) and Hodlnaut Telegram (https://t.me/hodlnaut). Thank you for your patience with us.

Frequently Asked Questions (FAQ)

1. Where are the Founders in all of this? 

The Founders are in Singapore and working hard on the recovery plan. 

2. Why is Hodlnaut still paying employees? Why is Hodlnaut not reducing costs? 

Since we halted withdrawals, we have laid off 80% of our employees (being approximately 40 employees), in order to reduce the company’s expenditure. The current team that we have retained are, in our assessment, necessary headcount in order for us to carry out key functions. 

3. Are there secured creditors? 

We do not have any secured creditors. 

4. How much does Celsius owe Hodlnaut?

Celsius has neither borrowed nor lent to Hodlnaut. Whilst Hodlnaut has an account with Celsius, Hodlnaut has not deposited any assets with Celsius.

5. I am currently holding stablecoins. Can I withdraw my assets now instead of going through the Judicial Management process? Stablecoins are not at “depressed” prices so why can’t we withdraw, why can’t we just go for liquidation?

Unfortunately, we are unable to facilitate any withdrawal of funds at this juncture in light of the judicial management process. No user will receive any priority in withdrawals. As mentioned above, in the event of a liquidation, all assets of the company are sold first, and then distributed to our users equally in proportion to their holdings. What this would mean is that even users who hold stablecoins would likely only get back a fraction of what was initially deposited. 

6. Are there pending proceedings between Hodlnaut and the Attorney-General Chambers / Singapore Police Force?  

Yes, there are pending proceedings between Hodlnaut and the Singapore Attorney-General / Singapore Police Force. However, while Hodlnaut is unable to disclose any information in this regard, these actions are taken in what we believe to be in the best interests of our users. 

7. How can I get a copy of the Judicial Management application and relevant affidavit?
   

You may request for a copy of the Judicial Management application and relevant accompanying affidavit if you are a user of our platform. Please login to our webapp and go to https://app.hodlnaut.com/fileshare where you can request to download these documents. After a request is submitted, the user will receive the relevant document(s) via email.

8. I’m unable to find the link to download a copy of the Judicial Management application and relevant affidavit. Why is that so?

Due to the confidential nature of these documents, we have restricted these to only be available to creditors of the Hodlnaut Group. The platform will only allow users to download the documents if you have a balance with us.

9. Why do Singapore residents get a copy of the Notice to All Relevant Parties but non-Singapore residents do not?
   

The purpose of the Notice to All Relevant Parties is for creditors of Hodlnaut Pte Ltd, ie users who are onboarded with the Singapore entity, on the process should they wish to attend the next case conference for the Judicial Management application on 30 August 2022 at 10:00am (GMT+8), in particular should they wish to seek directions from the Court. 

10. What does it mean to allow users to withdraw their initial deposit, with interest accrued in full, at a discounted amount and close their account with Hodlnaut?

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.

11. When is the next update? What’s the expected timeline on things?

Our next update will be on 23 August 2022. The next key timeline is that Hodlnaut’s Interim Judicial Management application is tentatively fixed to be heard before the Singapore Court next Monday, 22 August 2022 at 2:30pm (GMT+8).

12. With the Interim Judicial Manager / Judicial Manager making all the decisions, would the current communication channels be available in the future?
    

We endeavour to keep things status quo as much as possible. However, the ultimate mode of communication lies with the Interim Judicial Manager and Judicial Manager.

13. How can I reach Hodlnaut? This FAQ did not answer my questions. 

You can reach out to us via email at support@hodlnaut.com. We expect a high volume of enquiries and our team will do our best to respond as soon as possible.