Beleaguered crypto lender Hodlnaut Pte is reportedly facing new woes as the Singapore Police have launched an investigation. Local sources have reported that on November 23, 2022, the Singapore Police Commercial Affairs Department began investigating the Hodlnaut platform and its directors of cheating and fraud offenses. See, e.g. Tan, F. Police investigate S'pore-based crypto platform Hodlnaut for alleged cheating & fraud. (Accessed November 24, 2022)].
According to the Police, the majority of the complaints that gave rise to the investigation involve false information and misrepresentation regarding Hodlnaut's exposure to a certain digital asset. Those with verifiable Hodlnaut deposits who believe they have been defrauded by virtue of the misrepresentations made by the platform may file a complaint online by ckicking here.
The factual history of Hodlnaut is illustrative as to the causes for this investigation. The first signs of trouble for Hodlnaut appeared when it suspended platform withdrawals on August 8, 2022. Note that is just mere months following the start of the crypto contagion fueled by the collapse of the Terra ecosystem. At this time, Hodlnaut claimed the suspension of withdrawals was due to a liquidity crisis and that they had no exposure to the algorithmic stablecoin of the Terra system now renamed TerraUSD Classic (USTC). [See, e.g. Jha, P. Crypto lender Hodlnaut reportedly faces police investigation in Singapore. (Accessed November 24, 2022)].
Hodlnaut's operations suffered serious stress as a result of the ongoing crypto winter, and its situation further stressed as a result of the contagion caused by the Terra collapse. A similar situation is facing many within the cryptoverse but where Hodlnaut went afoul is in the misstating of its exposure to USTC. Initially it said it had no exposure when on-chain data disclosed their claim was false and that they had $150 million USTC in holdings. Now reportedly, it is believed that Hodlnaut lost $190 million due to the Terra crash. [See e.g. Akolkar, B. This Singapore-based Crypto Lender Faces Investigation for Possible Fraud. (Accessed November 24, 2022)].
Hodlnaut's court appointed temporary judicial managers in an October report to the Court confirmed the on-chain data as set forth above and likewise confirmed Hodlnaut lost almost $190 million due to the Terra debacle. The report also stated Hodlnaut later deleted thousands of documents, all investment related, in an attempt to hide the Terra exposure. [See, e.g. Butt, A. Singapore Investigates Crypto Lender Hodlnaut for Fraud – Is The Crypto Wild West Ending?. (Accessed November 24, 2022)].
It should be noted that regulators within Singapore have been tightening their hold on that nation's crypto sector. This tightening began with Terra's implosion and has been exacerbated by the Hodlnaut failure and the aftermath fallout from the FTX collapse. In October 2002, the Monetary Authority of Singapore (MAS) proposed a framework designed to reduce trading risks to retail investors. The MAS now prohibits retail crypto traders from using credit cards or borrowed funds to affect their trades.