Hodlnaut Downplayed $190 Million Loss In Terra’s Crash, Singapore Judicial Managers Report

Summary:

• Crypto lender Hodlnaut did not fully disclose its exposure to Terra’s failed ecosystem, Bloomberg reported.
• An interim judicial manager appointed by a Singaporean reported that the beleaguered crypto lender lost around $190 million when TerraUSD (UST) crashed in May but attempted to hide the massive loss.
• The judicial managers stated over 1,000 key records disappeared from the platform’s workspace.
• Hodlnaut employees are also suspected of cashing out from the platform before customer withdrawals were halted in August due to liquidity constraints. 

The latest findings provided to a Singaporean court revealed that cryptocurrency lender Hodlnaut did not fully disclose its exposure to Terra’s ecosystem, the blockchain led by Do Kwon which crashed in May 2022. 

Hodlnaut paused withdrawals in August 2022 months after Terra failed. The platform cited liquidity concerns and filed for protection from the court in a bid to stall creditors from taking legal actions. A three-month moratorium was issued while the company work towards unfreezing user assets.

As part of the moratorium, an interim judicial manager was appointed to dive into the platform’s records. According to Bloomberg, the IJM reported that Hodlnaut “downplayed” its Terra exposure. 

Monday’s reported estimated losses of around $190 million due to investments in TerraUSD (UST), Terra’s failed algorithmic stablecoin that promised up to 20% returns on the Anchor Protocol.

It appears that the directors had downplayed the extent of the group’s exposure to Terra/Luna both during the period leading up to and following the Terra/Luna collapse in May 2022.

The report submitted to the Singaporean court also shared two key findings. Firstly, over 1,000 business records were deleted from Hodlnaut’s Google workspace. Also, some employees allegedly cashed out around $540,000 between July and August when customer accounts were frozen. 

Monday’s judicial report also mentioned that important records regarding the crypto lenders’ Hong Kong division remain unavailable at press time. Notably, the IJM opined that Holdnaut’s Hong Kong subsidiary was tapped to deploy a bulk of the platform’s decentralized finance (DeFi) investments, including UST.

Hodlnaut founder Simon Lee previously asked the court to eject the IJM from its duties, claiming that the court-appointed Ernest and Young reported misleading findings.

Aftermath Of Terra’s Crash Unravels Further In Hodlnaut Report

Indeed, several firms have slid into troubled operations due to their exposure to Terra’s ecosystem. At press time, companies like Celsius and Three Arrows Capital face bankruptcy proceedings after their respective investments in Do Kwon’s blockchain tanked back in May. 

FatManTerra, a Terra community member who remains vocal about the crash on social media, surmised that Hodlnaut’s interaction with UST left room for skepticism. Monday’s report seemingly echoes concerns posted by the user earlier in June.