While blaming market conditions and lack of liquidity, Singapore-based crypto lending platform Hodlnaut has become the latest company to suspend deposits and withdrawals. Hodlnaut avoided 3AC exposure and earlier denied ever buying UST, but several reports and on-chain data have shown that the lending company at one point owned more than $150 million worth of UST.
The crypto lending company made an official announcement on August 8, alleging that market conditions have compelled it to suspend its services and that it is now actively working on recovery plans.
Hodlnaut also said that it has withdrawn its regulatory license application in Singapore and in that context, would no longer be able to offer any token swaps features. The official announcement read:
“We are actively working on the recovery plan that we hope to provide updates and details on as soon as permissible. We are consulting with Damodara Ong LLC on the feasibility and timelines of our intended execution plan and are strategizing our recovery plan with our users’ best interests in mind.”
The crypto lending firm stated that it would suspend all of its social media accounts except for the official Telegram and Twitter. Besides the social media suspensions, the founder Juntao Zhu has gone private on Twitter.
The crypto lending crisis started with the Terra (LUNA) – now renamed Terra Classic (LUNC) – ecosystem collapse followed by the bankruptcy of leading crypto hedge fund Three Arrow Capital (3AC). In that context, the back-to-back market turmoil developed a domino effect for crypto lenders with exposure to the hedge fund and the Terra ecosystem. Celsius, Voyager Digital, and Blockchain.com were some of the major crypto lenders that suspended their services.
Buy Crypto NowHodlnaut managed to avoid any 3AC exposure. However, some reports have alleged that the company was not transparent about its investments in Terra’s now defunct algorithmic stablecoin. A report that was published by Twitter handle Fatman in June pointed toward the massive exposure of Hodlnaut during the stablecoin’s depeg and how they misrepresented their positions:
They sold some UST as low as $0.40, degen shorted through bETH cross-margining, had huge, risky shorts on exchanges in the best case scenario, and in a hilarious move of brave defiance, they even re-entered Anchor after the collapse (small size). https://t.co/yfbTET4U4n (15/25)
— FatMan (@FatManTerra) June 26, 2022
Zhu has alleged that the company neither purchased any UST nor incurred any losses on its UST yield services, but he failed to provide any credible documentation as proof.
The notable downfall of another cryptocurrency lending platform invoked severe reactions from the crypto space with most of them advocating for investors to store their crypto off-exchange. Others suggested it would be the domino effect the UST collapse in May with effects existing today.
Another one bites the dust. Now that many of the largest players have gone under, which ones are next? If you still have assets with third parties, you should withdraw them to your own wallet ASAP. Not your keys, not your crypto. https://t.co/mY85yBhNbg
— Soldman Gachs (@DrSoldmanGachs) August 8, 2022
