- Earlier this year, Hodlnaut halted withdrawals for all users
- A circular by their interim judicial management shows that certain employees withdraw funds prior to the halt
- The circular also confirms that Hodlnaut misled users on their $UST exposure
The latest circular from Hodlnaut’s Interim Judicial Managers has possibly revealed shady practices at the company.
In August this year, the cryptocurrency yield platform announced that they would be halting withdrawals, swaps, and deposits for all users, and subsequently filed for Interim Judicial Management (IJM).
However, their actions leading to, and following the IJM, have been shady at best.
Recently, new reports have emerged that certain employees were warned to withdraw funds prior to the platform halting all services.
The Hodlnaut Saga: A Complete Timeline
The collapse of Terra Luna and 3AC were disastrous for many crypto firms. Heralding the start of a CeFi collapse, the events exposed shady practices and poor risk management in many centralized firms.
Hodlnaut was one of them, and despite their alleged “lack of exposure” to the Terra ecosystem, it became clear afterwards that they were heavily involved with $UST.
Not only did they have exposure to $UST, they employed reckless strategies on the way down, attempting to mitigate some losses. This includes selling $UST as low as $0.40, shorting it through margin, and re-entering Anchor post-collapse.
Shortly after, they announced that they were halting services on the platform and filed for IJM.
Insider Trading at Holdnaut?
With the collapse of Hodlnaut, many users lost access to funds, and some even lost life savings.
However, a recent circular to creditors from their Interim Judicial Managers shows that employees were able to save some funds prior to the platform halting.
Almost $1 million in funds were withdrawn by certain employees, who may have had insider information of what was going to happen.
Moreover, the report confirmed that management lied about their exposure to $UST and the Terra ecosystem, intentionally misleading customers on their risk management protocols.
The platform had also continued to promote their services following the fall of Terra, which may have led to even more customers depositing their idle funds.
The platform also continued to enter risky positions such as covered calls on ribbon finance, despite being their IJM.
Hodl-Not Your Funds in CeFi
The CeFi domino effect triggered by 3AC and Luna has been painful to not just those in the ecosystem, but the majority of crypto users.
The silver lining, however, is that DeFi has performed as intended, despite choppy market conditions. While exploits and hacks have been painful, the underlying protocols highlighted the benefits of smart contracts and decentralization.
On the other hands, CeFi platforms have only made headlines for the wrong reasons. The easy $UST arbitrage opportunities coupled with risk-on activities for supposedly “safe” platforms are not what Web3.0 needs, especially in the bear market.
[Editor’s Note: This article does not represent financial advice. Please do your own research before investing.]
Featured Image Credit: Chain Debrief