S’pore crypto platform Holdnaut and its directors investigated for possible cheating and fraud

The Commercial Affairs Department announced yesterday (Nov 23) that it has launched an investigation into crypto platform Hodlnaut and its directors for possible cheating and fraud offences under Sections 417 and 424A of the Penal Code 1871.

Hodlnaut’s co-founders Zhu Juntao and Simon Eric Lee are both directors of the company. 

The Singapore Police Force (SPF) said in a media statement that the police received multiple reports between August and November, alleging that Hodlnaut and/or its directors had made false representations relating to the company’s exposure to the Terra/Luna digital token ecosystem.

Earlier reports said 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.

Besides Hodlnaut, many other crypto firms were affected by the Terra/Luna collapse, including hedge fund Three Arrows Capital, as well as crypto lenders Celsius Network and Voyager Digital.

It was earlier reported that Hodlnaut lost nearly US$190 million in the crypto crash.

Public urged to submit documents

SPF urged those who have deposited digital tokens with Hodlnaut and believe that they have been defrauded through, among others, false representations made by Hodlnaut, to lodge a police report. 

It added that any documents relating to the transactions with Hodlnaut — including records of the payments made to and received from Hodlnaut as well as relevant correspondence with the platform — would help the police assist people with the review of their complaints.

On August 8, Hodlnaut announced that it has halted withdrawals, token swaps and deposits, and informed the Monetary Authority of Singapore (MAS) to withdraw its licence application. This meant that it will no longer provide regulated digital payment token (DPT) services.

That same month, it applied to the Singapore High Court to be placed under interim judicial management following the Terra-Luna collapse, as part of their business recovery plan.

In an effort to reduce burn rates, Hodlnaut said it would charge all open term interest rates to 0% APR from August 22. It also laid off 80 per cent of its employees (approximately 40 people) to reduce the company’s expenditure.

In end October, a Singapore court report disclosed that Hodlnaut has been hiding some documents from the interim judicial managers (IJMs).

The IJMs accused Hodlnaut founders Zhu Juntao and Simon Lee, and some unnamed employees, of being uncooperative. They are reportedly obstructing judicial managers from accessing and controlling several vital documents and records. Over 1,000 files from Google Workspace were deleted after the IJMs were appointed.

The documents would have helped the IJMs to understand the financial position of Hodlnaut better, and there’s also a problem of improper maintenance of accounting and financial records even before the IJM appointments.

Most recently on November 11, the IJMs confirmed that 25 per cent of Hodlnaut’s assets are held on centralised exchanges. Of that, about 72 per cent of S$18.5 million were parked with FTX.

They attempted to get the assets out from FTX before it suspended withdrawals two weeks ago, but failed to do so.

Featured Image Credit: Hodlnaut