Singapore police allegedly investigate Hodlnaut

It has been claimed that the authorities in Singapore are looking into allegations of cheating and fraud involving the cryptocurrency lender Hodlnaut.

There were multiple complaints lodged against the platform between the months of August and November 2022, according to reports that were published in the local media. As a result of these complaints, the commercial affairs department of the police department has opened an investigation into the founders of the exchange.

The bulk of complaints, according to the Singapore authorities, focus on deceptive claims and misinformation about the company’s exposure to a particular digital token.

Investors who were adversely affected by the Hodlnaut problem were also instructed by the police to register a complaint online and present verified evidence of their transaction histories on the site.

The cryptocurrency lending platform showed the first symptoms of difficulty on August 8, when it temporarily halted withdrawals on the site, claiming a liquidity shortage as the reason.

At the time, the platform said that they had no exposure to the algorithmic Terra stablecoin, which has since been discontinued and is now known as TerraUSD Classic (USTC).

On-chain data, however, contradicted the assertions made by crypto lenders and revealed that they possessed at least $150 million dollars worth of USTC.

In October, a court report provided more evidence that the data stored on the chain were accurate.

According to the article, the cryptocurrency lender suffered a loss of around $190 million as a result of Terra’s collapse. Subsequently, in order to conceal their level of risk, they destroyed thousands of papers linked to their investments.

After the collapse of the Terra ecosystem, Hodlnaut was able to keep its exposure to USTC a secret for almost three months. However, it eventually fell victim to the liquidity crunch, which forced the company to seek judicial management, during which a court appointed a new interim CEO for the company.

After a delay of three months, the directors of the company are now the subject of an investigation by the police for failing to keep the users informed.

In August, the cryptocurrency lender said that it was working on a strategy to restructure in the hopes that it would soon be able to resume operations.


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Hodlnaut Held Up to $13M on FTX Prior to Withdrawal Halt

The collapse of the FTX Derivatives Exchange has stirred a lot of awakening for several digital currency trading platforms and investors.


One of the entities that may be significantly impacted by this fall from grace is Hodlnaut, the Singapore-based crypto exchange that went bankrupt earlier in the summer.

Drawing on its previous court filings, there is every likelihood that Hodlnaut has as much as $13 million in deposits kept on FTX which it might not have withdrawn at the time the exchange halted withdrawals this week. 

With the supposed insolvency of the trading platform, some investors had begun counting their losses with an expectation that the billions of dollars that will likely be tied down in bankruptcy proceedings should the firm file for that protection will take a very long time to access.

This disposition is for exchanges and investors who are still healthy and does not reflect the position that will best be soothing for other embattled firms like Hodlnaut.

Hodlnaut suspended withdrawals back in August, citing the tough market conditions at the time. The withdrawal halt followed similar moves from other more capitalized crypto lending firms including Celsius Network, Voyager Digital, and Zipmex amongst others. About a week after it halted the withdrawals, the platform filed for bankruptcy protection with the Singapore High Court with investor’s funds still locked up to date.

Besides FTX, Holdnaut notably has locked funds on other trading platforms including Deribit, Binance, OKX, and Tokenize. With more than 70% of the $18.3 million held on these trading platforms tagged with FTX, the firm may find its own in-house challenges to be more compounded if it remains unable to withdraw these funds with the current state of affairs.

With the bailout from Binance out of the window, other stakeholders including Tron Founder Justin Sun have pledged support to FTX in a bid to help restore normalcy.

Image source: Shutterstock


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Algorand Foundation Faces $35M Losses from Exposure to Hodlnaut

The Algorand Foundation, whose mission is to empower the ecosystem of Algorand blockchain cryptocurrency protocol, on Friday announced that it has a $35 million exposure in USDC to Singapore-based troubled crypto lender Hodlnaut. Last month, Hodlnaut halted withdrawals, deposits, and token swaps, citing market volatility.

The Algorand Foundation said the above figure represents 3% of its assets, stating that it does not expect operational or liquidity issues due to its exposure.

“As part of the Foundation’s mission, from time to time, we invest a portion of our surplus treasury capital to generate yield for the purpose of Algorand ecosystem development, and these funds were invested for that purpose,” the foundation said.

The Algorand Foundation stated that it is pursuing all legal actions to maximize asset recovery from Hodlnaut.

On August 29, the Singapore High Court appointed Algorand’s nominees, Angela Ee and Aaron Loh of EY Corporate Advisors, to act as the interim judicial managers of Hodlnaut, the foundation said.

Hodlnaut’s withdrawal pause followed other crypto lending firms such as Celsius Networks, Voyager Digital, Babel Finance, and Vauld freezing withdrawals as well.

Hodlnaut suffered heavy losses from the TerraUSD crash. The company had invested some $317 million in TerraUSD (UST), a failed stablecoin, as a way to pass high yields through to its clients.

In May, Terra’s algorithmic stablecoin UST lost its peg and collapsed, directly wiping out more than $43 billion from the ecosystem. The crash inflicted losses of $189.7 million on Hodlnaut.

As a result, Hodlnaut stopped offering exchange services on its platform on August 8, citing a liquidity crisis and the need to work on a recovery strategy as the industry battles to survive in the wake of a collapse in the crypto prices.

Hodlnaut started operating as a lender for clients to borrow digital assets in April 2019. The service also provides a yield-earning feature that enables customers to earn up to 7.25% on their investments. By allowing users to lend money to verified institutions and businesses, Hodlnaut’s incentive structure functioned.

Image source: Shutterstock


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Hodlnaut Applies for Court Protection amid Liquidity Crises

Hodlnaut, a Singapore-based digital currency lending platform, has joined its counterparts in seeking out the protection of the courts with its recent application for Judicial Management. 


The crypto lending firm leaked some hints in a little more than a week since it announced it will be halting withdrawals based on its platform in response to the unfavourable market condition.

With the Judicial Management pursuit, Hodlnaut said it will be shielded from investors who may want to seek legal redress for losing their funds. The Judicial Management process will also present a form of a moratorium, granting the embattled crypto lender complete protection for a while.

“As we work towards stabilising our financial situation, the Founders and the Hodlnaut team in Singapore are working closely with our lawyers and have weighed various available options for our next steps,” the latest Hodlnaut announcement reads. 

“We are aiming to avoid a forced liquidation of our assets as it is a suboptimal solution that will require us to sell our users’ cryptocurrencies such as BTC, ETH, and WBTC at these current depressed asset prices. Instead, we believe that undergoing judicial management would provide the best chance of recovery. Therefore as of 13 August 2022, Hodlnaut Pte Ltd filed an application with the Singapore High Court to be placed under judicial management.”

According to Hodlnaut, it has requested the court to appoint Tam Chee Chong of Kairos Corporate Advisory Pte Ltd to be appointed as the Interim Judicial Manager and, subsequently, the Judicial Manager.

The move from Hodlnaut is somewhat related to the earlier move from Zipmex and Vauld Group, both of whom have also halted withdrawals and have landed a moratorium from the Singapore High Court. While the Vauld Group earned its moratorium earlier this month, Zipmex’s was issued this week, as reported by Blockchain.News.

Image source: Shutterstock


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Singapore Crypto Lender Hodlnaut Suspends Withdrawals, Citing Tough Market Conditions

Singapore-based cryptocurrency lending and borrowing platform Hodlnaut announced on Monday that it had suspended customer withdrawals, swaps, and deposits. The firm cited “difficult market conditions” as the reason that triggered the move.

The crypto lender also withdrew its application for a license from the Monetary Authority of Singapore (MAS) to offer digital token payment services. Hodlnaut received in-principle approval from the Central Bank in March.

The Singapore-based company mentioned that it wants to focus on stabilizing liquidity and preserving customer assets while working on a long-term solution.

Hodlnaut stated it is working with Singapore law firm Damodara Ong LLC on a recovery plan.

In a statement, the firm said: “Halting withdrawals and token swaps were a necessary step for us to stabilize our liquidity and give us the time to work closely with our legal advisors to come up with the best possible restructuring and recovery plan for our users.”

Hodlnaut also added that it is restricting some of its official channels and stated it would shut down its social media accounts.

So far, the firm has removed its YouTube channel and CEO, and co-founder Juntao Zhu has made his Twitter account private.

The company’s team page (on Hodlnaut’s website), which previously mentioned its two founders, five employees, and an advisor, has also been pulled down.

The firm mentioned that it will issue further updates on August 19.

Hodlnaut, which was established in 2019, manages more than $500 million in assets, according to the company’s LinkedIn profile.

Are Customer Funds Safe?

The development by Hodlnaut puts the firm on a long list of other crypto lenders that recently paused customer withdrawals, citing financial difficulties triggered by the ongoing severe market volatility.

In the past two months, companies such as Celsius Networks, Three Arrows Capital, Voyager Digital, Vauld, and CoinFlex, among others, suspended withdrawals or declared bankruptcy.

Although crypto prices have trended down for the better part of this year, May and June were disastrous months for cryptocurrency.

In the past two months, Bitcoin prices plummeted to values not seen since 2020 while exchanges and lending firms were forced to do things which nobody had expected.

One after another, companies halted withdrawals, leaving customers uncertain whether they would ever see their hard-earned money again.

While some of these companies have resumed withdrawals, others have only offered notes of optimism without tangible promises. This means the worst may still lie ahead.

Earlier last month, Sam Bankman-Fried, the founder of FTX exchange, stated that he was pouring hundreds of millions of dollars into struggling firms to keep them afloat but said there are others that he believes are already “secretly insolvent.”

Image source: Shutterstock


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Nexus Mutual Offers DeFi Insurance to Another Bitcoin Lending Platform

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Bitcoin lending service Hodlhaut has partnered with Nexus Mutual, creating a smart contract on Ethereum to provide insurance coverage to its investors. 

Hodlnaut Buys Into NXM Pool

Centralized financial service platform Hodlnaut has joined forces with Nexus Mutual to provide insurance coverage up to $6.7 million at a premium of 2.6%.

The firms deployed an Ethereum smart contract Hodlnaut Custody Cover to offer coverage to Hodlnaut users in the event of more than 10% loss in hack or theft or withdrawal suspension of more than 90 days. Hodlnaut has pledged $1 million of equity to the partnership.

A major portion of the equity will be used to stake NXM in the smart contract to underwrite the insurance.

Additionally, Hodlnaut has announced $110,000 NXM in yield farming rewards for the smart contract’s early stakers.

Hugh Karp, Founder of Nexus Mutual, wrote to Crypto Briefing: 

SIMETRI 10x potential

“This partnership is another demonstration of how open financial products on Ethereum provide the building blocks for amazing customer experiences. Hodlnaut users will have an easy way to protect themselves while Nexus Mutual members will benefit from increased distribution.”

Nexus Mutual recently expanded the business outside the blockchain to cover centralized exchanges like Coinbase, Kraken, Gemini, and Binance. The partnership marks another business merger between centralized services and the DeFi ecosystem.

Hodlnaut provides interest on Bitcoin, Ethereum, and two stablecoins in USDC and USDT by lending to institutional margin traders. In April 2019, the platform received a $100,000 pre-seed investment from Antler to kickstart the project. 

Disclosure: The author held Bitcoin at the time of press. 

This news was brought to you by ANKR, our preferred DeFi Partner.

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