HectorDAO Files for Chapter 15 Bankruptcy Amidst Market Crashes and Hack Attacks
Summary:
HectorDAO, a decentralized organization, has filed for Chapter 15 Bankruptcy following market crashes and hacks that caused severe financial loss. As per the filing overseen by Interpath Advisory, the financial crisis has been attributed to the Terra Network's collapse, Multichain protocol's crash, and a treasury hack. Despite ongoing struggles, 83% of DAO members voted for liquidation. However, a subsequent hack led to allegations of management negligence, ultimately culminating in a demand for neutral party control over remaining funds.
In the wake of market crashes and devastating hacks, HectorDAO, a self-governing decentralized organization, has lodged a petition for Chapter 15 Bankruptcy in the U.S. The request, dated June 17, was submitted to court-appointed bankruptcy management firm Interpath Advisory, which identified three main contributors to HectorDAO's fiscal crisis - the May 2022 downfall of the Terra Network, Multichain protocol's crash, and a crippling hack on Hector's treasury.
Interpath Advisory, in its report, suggested that an investigation is underway to determine if the January 16, 2024 hack, which stripped HectorDAO of $2.7 million, was orchestrated by the ex-managers of DAO's treasury.
HectorDAO's problems initially surfaced in 2022 following the implosion of Terra's ecosystem, eroding a whopping $16.4 million from the DAO's treasury. Despite this financial blow, HectorDAO persisted with business as usual just over a year later until July 17, 2023.
On July 15, 2023, HectorDAO's community grappled with a critical decision - to relocate the organization onto a different blockchain, rechristen the project, or dissolve all assets and shut down the organization. Following the decision, an overwhelming 83% of the DAO members opted for liquidation in accordance with the HIP-42 vote.
Post the decisive vote, a board was constituted by the decentralized community's ruling body to oversee the dissolution and allocation of remaining assets.
But a massive hack swindled HectorDAO of $2.7 million just as the assets were about to be shared among investors. Strikingly, after the January 16 incident, DAO members claimed that they were unable to reach the liquidation board.
The community subsequently accused the management of abject negligence and potential complicity in the hack, ultimately demanding that control of the outstanding funds be ceded to a neutral party, Interpath Advisory.
Chapter 15 Bankruptcy filings help offshore entities or those with cross-border investors to initiate bankruptcy processes in U.S. courts. However, a Chapter 15 filing doesn't reengineer an entity's holdings or reconfigure debt; it merely provides corporations, organizations, and associated investors with a legal pathway in U.S. courts to resolve these issues.
Published At
6/20/2024 11:44:19 PM
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