Creditors of crypto lender Hodlnaut rejected a restructuring plan for the company, according to a Bloomberg report that cited a Jan. 11 filing.

Their preference is for the liquidation of the firm, saying it better serves their interests, according to the filing prepared by Hodlnaut's interim judicial managers, Bloomberg said Friday.

The proposed restructuring plan would have allowed Hodlnaut directors who were at the helm during its collapse to continue managing the company. Liquidation would "maximize the company's remaining assets available for distribution," one of the creditors, Algorand Foundation, wrote in the filing.

Hodlnaut froze withdrawals in August and was placed under interim judicial management (IJM), a form of debt restructuring in which another entity manages a distressed business and its property and assets.

The lender's woes emanated from the collapse of Terra ecosystem last year, to which Hodlnaut directors downplayed their exposure, the judicial managers said. The firm had in fact converted a significant amount of crypto to terraUSD (UST), which brought about losses of about $190 million, according to the IJM.

Terra’s downfall had far-reaching ramifications across the crypto market, setting off a chain of crypto firms collapsing, including prominent hedge fund Three Arrows Capital and crypto lenders Celsius Network and Voyager Digital.

Hodlnaut did not respond to CoinDesk's request for comment.

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