HectorDAO, a decentralized autonomous organization, filed for bankruptcy (Chapter 15)

HectorDAO, a decentralized autonomous organization, filed for Chapter 15 bankruptcy in the United States after a series of stock market crashes and hacks drained the community of its funds.

According to a June 17 filing from Interpath Advisory, a court-appointed firm specializing in bankruptcy and reorganization administration, HectorDAO’s current financial situation is primarily due to three factors: The collapse of the Terra network in May 2022, the collapse of the Multichain protocol. , and a hack affecting Hector’s treasure.

In the filing, Interpath Advisory said it was still investigating whether the Jan. 16 hack, which drained $2.7 million in funds from HectorDAO, was an inside job committed by former treasury directors of DAO.

Part of the Chapter 15 filing explains Interpath Advisory’s responsibilities as receiver in this matter. Source: CortListener

The eventful history of Hectordau

The decentralized community’s problems began in 2022 with the collapse of the Terra ecosystem, leading to a huge loss of $16.4 million in HectorDAO treasury assets. Despite this setback, Hectordao members continued their normal activities for more than a year, until July 17, 2023.

On July 15, 2023, members of the HectorDAO community were faced with a choice: migrate the decentralized organization to another blockchain and rename the project or liquidate all assets and shut down the organization. Two days later, 83% of DAO members voted to liquidate the DAO in accordance with the HIP-42 vote.

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Immediately after the vote, the decentralized community’s board of directors created a committee to manage the liquidation and distribution of the remaining assets.

However, as the assets were to be distributed to investors, HectorDAO suffered a $2.7 million exploit. Members of the decentralized organization claimed that after the incident on January 16, it was no longer possible to contact the liquidation committee.

This led DAO members to accuse the management team of gross negligence and possible involvement in the hack. Ultimately, the Hector community demanded that control of the remaining funds be given to a neutral party – Interpath Advisory.

What is chapter 15?

Chapter 15 bankruptcy filings allow foreign entities or entities with investors in international jurisdictions to file bankruptcy proceedings in the U.S. court system.

Filing under Chapter 15 does not, in and of itself, reorganize an entity’s assets or restructure debts – it only gives participating companies, organizations, and investors a means to resolve these matters in U.S. courts.

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