How Hector Network investors are clawing back $9m after ‘rage quit’

Hector Network, the failed DeFi project once worth over $100 million, has now gone into receivership in the British Virgin Islands after its community “rage quit” last year, dissolving the venture.

That’s based on a court order by the Eastern Caribbean Supreme Court on February 19, an announcement on the Hector Network site states. Interpath BVI has been chosen as interim receivers, according to the court order.

“The Receivers have taken full custody of the treasury assets, which have been moved to a new secure wallet,” James Drury, an Interpath BVI director overseeing the receivership, told DL News.

As interim receivers, Interpath are now custodians of Hector DAO’s remaining assets, worth $9.3 million — a far cry from the $100 million it owned during its heyday 18 months ago.

On-chain data from February 19 show multiple transfers totalling $9.3 million in USDC and Ether from Hector DAO’s known treasury wallet address to a new location — a Gnosis Safe wallet with a three-of-three multisig.

Interpath is now waiting for the court in the British Virgin Islands to finalise its role as receiver. That’s expected to happen on March 12, after which the firm said it will proceed with plans to liquidate and distribute the treasury assets to Hector Network’s investors.

Drury confirmed that Interpath has sole custody of Hector DAO’s treasury.

“All previous multi-signors have been removed from the old wallet and none are involved in the new wallet,” Drury said. “The multi-signors are employees of Interpath.”

Multisig wallets require more than one signor to approve a transaction.

Receivership is a court-mandated process aimed at asset recovery on behalf of creditors of a failed enterprise. The process nominates a receiver to liquidate the company’s holdings and distribute them to creditors.

Hector DAO is the community that briefly administered the Hector Network project.

Hector Network investors had previously been locked out of official communication channels by the project team.

Interpath said it has control of those social channels and has also provided a dedicated email address that investors can use to contact the advisory firm.

Hector DAO: The road so far

Interpath’s involvement as receivers of Hector Network assets is the latest salvo in the Hector Network rage quit saga.

Rage quit happens in DeFi when project participants, be they investors or developers, agree to liquidate all or part of the protocol’s treasury and distribute the proceeds pro-rata to token holders.

Dissatisfied with over 18 months of perceived mismanagement of funds by the developers, Hector Network investors voted to dissolve the project last April. That’s because the project’s treasury dwindled from $100 million to $16 million, mostly via six-figure salaries awarded to team members.

After a protracted struggle, the remaining members of the Hector Network team agreed to liquidate the treasury. That decision happened immediately after the project suffered $8 million in losses from last year’s Multichain bridge incident.

The redemption was again suspended after $2.7 million was mysteriously removed from the project’s treasury.

Hector Network developers have not responded to several requests for comments from DL News in the past.

Interpath says it is investigating January’s unauthorised withdrawal from the treasury.

“The Receivers have already started looking at tracing the proceeds of that hack on the basis that the right to recover those proceeds comprises an asset of Hector DAO and therefore something that we should be taking steps to preserve.”

Interpath has some experience with crypto asset recovery as the firm was involved in the efforts to recover funds syphoned in the $4 million exploit of bridge protocol ChainSwap in 2021.

The firm is also acting as liquidator of Three Arrows Fund Limited, the feeder fund of the defunct crypto hedge fund Three Arrows Capital.

Osato Avan-Nomayo is DL News’ Nigeria-based DeFi correspondent. He covers DeFi and tech. To share tips or information about stories, please contact him at osato@dlnews.com.