HectorDAO files for Chapter 15 of the U.S. Bankruptcy Code
HectorDAO, a decentralized autonomous organization, has filed for Chapter 15 bankruptcy in the US after a series of market crashes and hacks drained its community funds.
According to a June 17 filing by Interpath Advisory, a court-appointed firm that specializes in bankruptcy administration and reorganization, HectorDAO’s current financial position is primarily due to the May 2022 Terra network collapse, the multichain protocol collapse, and the impact of the Hector Treasury. hacking.
In the filing, Interpath Advisory noted that it is still investigating whether the January 16 hack that drained $2.7 million in funds from HectorDAO was an inside job perpetrated by a former administrator of the DAO’s treasury.
HectorDAO’s difficult history
The decentralized community’s troubles began with Terra’s ecosystem collapse in 2022, which resulted in a massive loss of $16.4 million to HectorDAO’s financial assets. Despite these difficulties, HectorDAO members continued normal operations for over a year until July 17, 2023.
On July 15, 2023, HectorDAO community members were faced with a choice: migrate the decentralized organization to another blockchain and rebrand the project, or liquidate all assets and close the organization. Two days later, 83% of DAO members voted to liquidate the DAO following a HIP-42 vote.
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Immediately after the vote, the decentralized community’s governing body established a committee to handle the liquidation and distribution of remaining assets.
However, with the assets set to be distributed to investors, HectorDAO suffered a loss of $2.7 million. Members of the decentralization group claimed that no contact was made with the liquidation committee after the January 16 incident.
This led DAO members to accuse management of gross negligence and possibly involvement in hacking. Ultimately, the Hector community demanded that control of the remaining funds be placed in the hands of a neutral party, Interpath Advisory.
What is Chapter 15?
Filing Chapter 15 bankruptcy allows a foreign corporation or an entity with investors across international jurisdictions to file bankruptcy proceedings in the U.S. court system.
A Chapter 15 filing does not, by itself, reorganize a company’s equity or debt. It simply provides companies, organizations, and their investors with an avenue to resolve these issues in the U.S. courts.
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