Singapore-Based Hodlnaut Halts Withdrawals Citing ‘Market Conditions’

Crypto lender Hodlnaut has halted withdrawals, token swaps, and deposits for its users. The Singapore-based platform stated that it reached this “difficult decision” on the back of recent “market conditions”.

“We would like to reassure you that this difficult decision was taken for us to focus on stabilizing our liquidity and preserving assets, while we work to find the best way to protect our users’ long-term interests,” the lender said in a statement.

Hodlnaut had no exposure to Celsius

Several other platforms had revealed that they were experiencing liquidity issues. The High Court of Singapore recently granted the troubled cryptocurrency lender Vauld three months of protection from creditors.

The crisis in the industry was primarily on the back of Terra’s demise, Celsius Network’s financial difficulties, and Three Arrows Capital’s loan default. Notably, according to the court’s bankruptcy documents, Hodlnaut was also listed as one of Celsius’ institutional clients.

Hodlnaut has reportedly notified the Monetary Authority of Singapore (MAS) that it is withdrawing its license application related to regulated digital payment tokens (DPT). This essentially means that Hodlnaut will stop offering any lending, borrowing, and token swap services as a crypto provider. All internal transfers between Hodlnaut accounts have also been disabled.

While users can still access their account statements, the platform has yet to give a definite timeline of when withdrawals will resume. All that is known is it is expected to be a “long process.”

Meanwhile, the platform is only keeping limited channels of communication open, and has vowed to update on the next step on August 19 on its official blog.

“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 on the feasibility and timelines of our intended execution plan and are strategizing our recovery plan with our users’ best interests in mind,” Hodlnaut said.

All users have been asked to refrain from making any new deposits, but the platform has stated that it “will continue to pay out interest earned according to these rates every Monday until further notice.”

Researcher accuses lender of lying and misrepresentation

According to crypto researcher FatMan, Hodlnaut allegedly “lied” and “misrepresented stablecoin staking risks” to its customers by appearing trustworthy.

FatMan, from Terra Research Forum, claims that responsible rate management and rejection of 3AC’s loan request after receiving a green light from MAS were an impressive façade. The researcher stated, “14% on a CeFi platform is very high for a stablecoin, even higher than what 3AC was offering lending platforms.”

By quoting an unnamed whistleblower who stated the lender had significant UST exposure during the depeg, FatMan also disputes Hodlnaut’s assertions that they had no exposure to Anchor.

Based on FatMan’s analysis, during the depeg, things picked up speed and the lender began giving bETH as security to Anchor and took out UST loans totaling millions to transfer the money to Binance.

Additionally, the researcher alleges that they started burning UST for LUNA and sending it to exchanges, probably to take advantage of the sharp price disparity at the time.

However, Hodlnaut might not be the only platform circumventing the rules. “The truth is, many of these CeFi platforms are far more irresponsible & degenerate than you can imagine, and the public needs to know the *real* risks behind all the magical 8% stablecoin APYs,” FatMan added. 

“It’s self-custody season. The tide is receding. Don’t be the one caught next,” the researcher cautioned.

How the freeze may further impact market

The platform that was set up in 2019 revealed in Feb this year that its assets under management (AUM) have surpassed $100 million.

But Mikkel Morch, executive director at crypto investment fund ARK36, told Bloomberg, “Hodlnaut is a relatively small service, so we do not expect this news to have a noticeable impact on the price of the major assets, especially since the markets show an arguably more bullish structure than they did when the crypto credit crunch started in June.”