Hodlnaut reportedly lied about its exposure to the now-defunct Terra algorithmic stablecoin and lost nearly $190 million.
A police investigation into potential cheating and fraud violations is apparently underway against Singapore-based cryptocurrency lender Hodlnaut. Several complaints made against the platform between August and November 2022 prompted the police’s commercial affairs department to launch an investigation into the exchange’s founders, according to reports in the local media.
The company’s exposure to a particular digital token has been the subject of many complaints, according to the Singapore police, who underlined this. The Hodlnaut crisis affected investors were also urged by the police to submit online complaints and verifiable records of their platform transaction histories.
When the crypto lender banned platform withdrawals on August 8 due to a liquidity crunch, this was the first indication that things were not going well. Withdrawals were stopped only a few months after the infamous crypto contagion in the second quarter, which was caused by the collapse of the Terra ecosystem.
At the time, the platform asserted that they had no exposure to the TerraUSD Classic, formerly known as the defunct algorithmic Terra stablecoin. On-chain data, however, refuted the claims of crypto lenders and suggested they held at least $150 million in USTC.
An October court report later verified the on-chain data. According to the report, the cryptocurrency lender suffered a loss of almost $190 million due to the Terra collapse and later deleted thousands of documents pertaining to their investments in an effort to conceal their exposure.
After the Terra ecosystem collapsed, Hodlnaut was able to conceal its exposure to USTC for almost three months, but it eventually succumbed to the liquidity crisis, forcing it to seek judicial management under which a court appointed a new interim CEO for the company.
After three months, the directors of the company are now being investigated by the police for failing to inform users. The cryptocurrency lender had stated in August that it was developing a restructuring strategy with the intention of starting up again soon.