How the TerraUSD Crash Caused This Crypto Exchange to Cut Its Workforce by 80%

The free fall of TerraUSD and sister token Luna in May reportedly triggered a massive over $40 billion crash in the market, impacting many investors, companies and exchanges. The entire crypto market went through an insane sell-off between May and June of this year, and so began the trend for cryptocurrency exchanges to stop their withdrawals. Basically, crypto exchanges were running out of liquidity and by freezing wallets they stopped more outflows from their system. But the chaos had already begun, and finding the right solution now to keep their heads above water could do them some good. Some crypto exchanges have opted for bankruptcy, while others are looking for investments and joint ventures. In addition, some exchanges have laid off their staff to minimize costs, including Hodlnaut.

The Hodlnaut Group’s financial health deteriorated after its Hong Kong subsidiary suffered heavy losses following the TerraUSD crash.

In Friday’s update, Hodlnaut said, “we have applied for receivership given the financial health of the Hodlnaut Group.”

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He said: “Hodlnaut’s current financial situation is the result of losses incurred by Hodlnaut’s Hong Kong subsidiary during the TerraUSD crash, unusually high withdrawal volumes, the overall drop in cryptocurrency prices from their peak in 2021 and issues with some users. who deposit significant amounts of cryptocurrency with Hodlnaut.”

So Hodlnaut said, “We believe that forensics is the option that will most benefit our users now and in the long run.”

The crypto exchange fell under forensics, saying, “First, it would prevent the liquidation of Hodlnaut’s holdings of BTC and ETH at current low prices (which have fallen significantly since their all-time highs in 2021).”

In addition, in the event of liquidation, Hodlnaut said, “all company assets are first sold and then distributed to our users in proportion to their holdings. This would mean that all users (whether you have deposited BTC, ETH or stablecoins) would likely only have one. recover a fraction of what was initially deposited.

Second, the judicial board provides an opportunity for Hodlnaut to implement his recovery plan and rehabilitate the company.

“The plan aims to restore our asset-to-debt ratio to at least 1 and ultimately allow users to withdraw the full value of their cryptocurrency deposited with Hodlnaut. If the acting Chief Legal Officer, then Chief Legal Officer, is appointed, they will replace Hodlnaut’s management and make decisions on behalf of and in the best interests of our users,” said Hodlnaut.

To give users access to their funds, Hodlnaut said: “As such, we are also exploring the possibility of allowing users to withdraw their first deposit, with accrued interest in full, at a reduced amount and close their account with Hodlnaut “.

However, he also added: “As we are already applying for judicial management, this process must be reviewed and approved by the bailiff in the event that he is appointed.”

Speaking of the path to follow, Hodlnaut said they will take steps to lower the burn rate. As a result, they will change all open-term interest rates to 0% APR starting August 22 at 5:00 PM (GMT+8).

To reduce costs, the exchange also reduced its workforce by 80%.

“Since we stopped shooting, we have also laid off 80% of our employees (approximately 40 employees) in order to reduce operating costs. The current team we have retained is, in our view, the necessary workforce to perform key functions,” he added.

Hodlnaut’s request for interim judicial leadership will be heard by the Singapore courts. The hearing is set for August 22. If successful, an interim bailiff will be appointed by the Singapore court.

Then the acting judicial director will take the place of the directors of Hodlnaut Pte Ltd and decide how the company should be run. In addition, the bailiff can then assess a recovery plan and propose it to the company.

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