Singapore Police Probe Hodlnaut for ‘Possible Cheating and Fraud’

Singapore Police Probe Hodlnaut for ‘Possible Cheating and Fraud’



Singapore’s white-collar crime investigation unit, the Commercial Affairs Department (CAD), on Wednesday, launched a probe into troubled crypto lender Hodlnaut for “possible cheating and fraud,” according to an official statement

Between August and November, the police received “multiple reports” that Hodlnaut and its directors had made “false representations” about the lender’s exposure to “a certain digital token.” 

The unnamed token likely refers to Terra’s now-collapsed USTC, formerly known as UST, an algorithmic dollar-pegged stablecoin that rapidly depegged back in May. Decrypt reached out to Singapore’s CAD and Hodlnaut to confirm this, but did not receive an immediate reply. 

The Terra ecosystem’s historic collapse bankrupted several crypto lenders—including Celsius, Voyager, and Vauld—and resulted in Hodlnaut’s current liquidity troubles. 

Phemex

Hodlnaut on the brink

Hodlnaut appears to have been badly affected by the contagion of the Terra crisis. 

On August 8, the company froze withdrawals, deposits, and token swaps to “give [it] the time to work closely with [its] legal advisors to come up with the best possible restructuring and recovery plan for [its] users.”

Hodlnaut filed for interim judicial management on August 13 to gain temporary protection from any legal claims. The process also covers the beleaguered lender from having to sell any of its Bitcoin and Ethereum holdings at a loss. 

Later that month, the company cut 80% of its staff to save money.

By August 30, Hodlnaut had been granted judicial management by the Singapore High Courts. 

Interim managers Ee Meng Yen Angela and Aaron Loh Cheng Lee from EY Corporate Advisors Pte. were appointed as the company’s interim judicial managers (IJMs), although founder Simon Lee petitioned the High Court to remove EY from the restructuring process, accusing the consulting firm of dishonesty.

The IJMs published a report at the end of October revealing Hodlnaut lost around $189.7 million from the Terra crash. It also said that Hodlnaut’s directors “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.” 

A new report by the interim managers has added even more fuel to the flames.

Nearly 72% ($13.4 million) of the assets the lender held on centralized exchanges were deposited in the now-bankrupt FTX, the industry’s other historic catastrophe this year.

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