HectorDAO Driven to Bankruptcy by Hacks and Market Collapses

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  • HectorDAO has gone into bankruptcy after experiencing a hack and unfavorable market conditions
  • Some market factors that have negatively impacted the DAO include the collapse of the Terra protocol
  • It also suffered a $2.7-million hack early this year

HectorDAO has lost the fight to hacks and market collapses that have forced it into bankruptcy. The DAO has filed for bankruptcy in the United States with the collapse of Terra network and a hack that siphoned close to $3 million from its treasuries earlier this year being part of the reasons why it was unable to meet its financial obligations. The Chapter 15 bankruptcy filing invites the court to oversee the reorganization of the DAO and how to settle outstanding debt, a process that may take years.

HEC Token Holders Come First

In February, the Virgin Islands High Court directed insolvency consultancy firm Interpath Limited to take over control of the DAO after it suffered a $2.7-million hack. The hack was suspected to be an inside job or orchestrated by a rogue developer.

According to the bankruptcy filing, Interpath Limited intends to use available resources to take custody, transfer, and or distribute the DAO’s assets. In an announcement, the consultancy firm said it’ll act in “respect of the interests of the HEC token holders.”

HectorDAO’s financial problems started in 2022 when the fall of Terra left a $16.4 million hole in its books. The DAO still managed to meet its obligations for more than a year before its members voted to share its resources and wind down the entity.

HectorDAO Members Want a Neutral Party

The community-driven liquidation didn’t go as planned because the DAO’s treasury was hacked and close to $3 million was lost before the actual distribution took place. The DAO members accused the management of stealing the funds demanding the involvement of a neutral party like Interpath Limited.

With HectorDAO filing for bankruptcy, it’s unclear whether Interpath Advisory will successfully pursue the DAO’s hackers.