The fund said it is “applying all legal remedies to maximize asset recovery.”
The Algorand Foundation discovered a $35 million USD Coin (USDC) hole in its balance sheet due to exposure to cryptocurrency lending company Hodlnaut, which has suspended payouts since August 8.
Algorand is an institutional blockchain infrastructure with built-in smart contract features. Algorand Foundation is a non-profit public organization dedicated to the development of the Algorand ecosystem.
The announcement was made on the Algorand Foundation’s website on Friday, with the foundation saying it is “using all legal means to maximize asset recovery.”
Hodlnaut’s financial situation first took a turn for the worse when its $300 million investment in TerraUSD (UST) in the anchor protocol plummeted following the depegging of UST and the collapse of the Luna Classic (LUNC) token, causing the crypto lending company to suspend payouts. and ceased all trading activity, citing a liquidity crisis.
A few weeks later, a Singaporean court placed the company under temporary judicial administration, a kind of bankruptcy protection program.
The Algorand Foundation said the bulk of the investments blocked on the platform consisted of “blocked short-term deposits” that are currently unavailable due to Holdnaut’s suspension of withdrawals.
However, the Algorand Foundation notes that the $35 million represents less than 3% of the fund’s assets, and they “do not anticipate (any) operational or liquidity issues,” adding that “the funds represent excess daily requirements”:
“We are investing some of our surplus equity to generate income for the development of the Algorand ecosystem and these funds have been invested for this purpose.”
Cryptocurrency lender Hodlnaut is now subject to preliminary court hearings to resolve its liquidity issues.
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Under Singapore law, companies are placed under temporary judicial administration for the purpose of debt restructuring in order to preserve and protect assets at risk until litigation begins.
The Algorand Foundation played a key role in establishing that, on August 29, the Supreme Court of Singapore appointed Foundation nominee Angela Yi, along with Aaron Lo of EY Corporate Advisors, as Hodlnaut’s interim litigators to manage Hodlnaut’s assets in time to secure further litigation.