In a recent publication, the Singapore police force revealed that they are looking into crypto lending platform Hodlnaut. The agency’s Commercial Affairs Department is reportedly handling the investigation into accusations of cheating and fraud among the DeFi lender’s leadership.
Users File Complaints with the Police
According to the release, several accusatory reports surrounding the platform have made their way to the police since August. These allegations claim that the company’s leadership had shared false data regarding its exposure to an undisclosed virtual asset.
Arising from these police reports, the CAD is investigating Hodlnaut and its directors for possible cheating and fraud offences under Sections 417 and 424A of the Penal Code 1871,” said the police release.
In their release, the police encouraged users to submit reports if they had deposited assets with Holdnaut and felt they had been defrauded afterward. They also instructed them to submit documents backing up their claims of transacting with the lender.
Such documents include the records of the payments made to and received from Hodlnaut as well as relevant correspondence with Hodlnaut.”
Hodlnaut Implicated in Terra Exposure
Hodlnaut’s troubles go back to May. It was one of many platforms to take a major blow from the Terra ecosystem’s dramatic collapse. Interestingly, when the crash first took place, Hodlnaut informed users that it had zero ties to Do Kwon. It also renounced ties to the Do-Kwon-led TFL’s algorithmic stablecoin, TerraUSD Classic (USTC). However, on-chain data later disclosed USTC exposure worth a minimum of $150 million, disproving Hodlnaut’s initial statement.
Hodlnaut was able to hide its exposure for nearly 3 months. However, in August the crypto lender shut down withdrawals attributing the move to difficult market conditions. Notably, some employees took out more than $500,000 worth of assets a month suggesting they knew there were problems.
A few weeks later Hodlnaut applied for and received approval from the court to be placed under judicial management. The lender’s hope was that this move would help it with rehabilitation and ward off a forced liquidation of its assets.
Hodlnaut Faces Uphill Struggle
A later report from the interim judicial managers confirmed the company’s exposure to the Terra crash placing its losses at about $190M. Hodlnaut allegedly disposed of over 1000 documents that could have revealed its losses. As such, the judicial managers were unable to work towards resolving its issues.
To make matters worse, late last month, the exchange informed the public that it had sizeable assets in FTX before its collapse. According to its release, more than 70% (~$13M) of the troubled lender’s assets held on CEXs had been desposited in FTX.
It is still unclear whether Hodlnaut’s managers moved funds away from FTX before operations ceased. Regardless, Hodlnaut’s directors are now facing an investigation for withholding information from the company’s clients.
