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Following recent Hodlnaut credit woes, the Algorand Foundation says 3% of its assets are tied up with the Singaporean-based crypto lender.
The Algorand Foundation recently disclosed a $35 million exposure in USDC to embattled crypto lender Hodlnaut. The blockchain-focused foundation posted a message to its Twitter and website platforms, which read:
“Today we are informing the community that the Algorand Foundation has a $35 million USDC exposure to Hodlnaut, a Singapore-based crypto lender that was placed under Interim Judicial Management after suspending withdrawals from its platform on August 8, 2022.”
However, the Algorand Foundation also stated that its Hodlnaut exposure represents under 3% of total assets. As a result, the foundation said it is not at risk of encountering liquidity or operational problems. On the rationale behind this particular investment decision, the Algorand Foundation added that “as part of the Foundation’s mission, from time to time, they [we] invest a portion of our surplus treasury capital to generate yield for the purpose of Algorand ecosystem development, and these funds were invested for that purpose.”
The Algorand Foundation also stated that it is availing itself of all legal recourses to optimize asset recovery from Hodlnaut.
More on How the Algorand Foundation & Hodlnaut Situation Came to Be
Algorand is an institutional-grade blockchain infrastructure with embedded smart contract functionality. A significant chunk of the firm’s investment, which comprises locked, short-term deposits, became inaccessible when Hodlnaut suspended withdrawals. On August 8th, the embattled crypto lender discontinued client withdrawals amid liquidity challenges. Contributing factors to these liquidity constraints reportedly include the debilitating Terra ecosystem failure some months back.
According to a report by The Block, Hodlnaut had around $317 million tied up in the ill-fated stablecoin TerraUSD (UST). The Singapore-based crypto lender undertook this investment in Anchor Protocol on Terra to channel high yields through to its customers. However, in May, UST sharply plunged below its dollar peg, resulting in a substantial $190 million loss for Hodlnaut.
In the aftermath of the TerraUSD situation, Hodlnaut has not only frozen customer withdrawals but also filed for creditor protection. Last month, the crypto lender, in a court affidavit, reported a financial shortfall of nearly $200 million as it seeks court protection. The affidavit, which reveals Hodlnaut’s outstanding liability, as well as concrete realizable assets, reads:
“As of 8 August 2022, the Hodlnaut Group has an outstanding liability balance of SGD 391M and estimated realisable assets of SGD 122M in cryptocurrency.”
Furthermore, the court document states that the financial situation affords the Hodlnaut Group a realizable cryptocurrency Asset-to-Debt ratio of around 0.31.
Late last month, the Singapore High Court appointed Algorand’s nominees, Angela Ee and Aaron Loh to serve interim roles. According to the Foundation, both Ee and Loh will act as the interim judicial managers of Hodlnaut. The two new interim judicial managers are EY Corporate Advisors affiliates.
The Algorand Foundation is a non-profit community organization that focuses on developing the Algorand ecosystem. The foundation’s network recently completed an upgrade that increased its capacity significantly.