The Algorand Foundation’s balance sheet has a $35 million USDC hole because it lent money to the troubled cryptocurrency lending company Hodlnaut. Hodlnaut has stopped withdrawals since August 8.
Algorand is a blockchain infrastructure for institutions that has built-in smart contract functionality. The Algorand Foundation is a non-profit community group that works to improve the ecosystem of Algorand.
The announcement was made on the website of the Algorand Foundation on September 9. The Foundation said that it is “pursuing all legal remedies to get back as much money as possible.”
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First, Hodlnaut’s finances got into trouble when its $300 million investment in TerraUSD (UST) on the Anchor Protocol dropped dramatically after UST was de-pegged and the LUNA token collapsed. Because of this, the crypto lending company stopped all withdrawals and trading, saying that there was a shortage of cash.
After a few weeks, the Singapore court put the company under interim judicial management, which is a way to protect creditors.
The Algorand Foundation said that most of the locked investments on the platform were “locked, short-term deposits,” which can no longer be accessed because Holdnaut stopped withdrawals.
But the Algorand Foundation says that the $35 million is less than 3% of the foundation’s assets and that they “do not anticipate any operational or liquidity issues” and that the funds “were a surplus to day-to-day requirements”:
“We invest some of our extra Treasury capital to make money for the development of the Algorand ecosystem, which is why these funds were invested.”
The troubled cryptocurrency lender Hodlnaut now has to deal with an interim judicial management to fix its cash flow problems.
Related: The Singapore Court grants creditor protection to crypto lender Hodlnaut.
Under Singaporean law, corporate entities with a lot of debt are put under Interim Judicial Management in order to save and protect assets that are at risk before legal proceedings begin.
The Algorand Foundation has been very important. On August 29, the Singapore High Court appointed Angela Ee and Aaron Loh of EY Corporate Advisors as Interim Judicial Managers for Hodlnaut. Their job is to protect Hodlnaut’s assets until the next court case.
