A judicial report claims Hodlnaut lost $189.7m after the Terra incident. A report by Singapore High Court-appointed temporary judicial managers argues 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”.

The Terra Fiasco

Confidence in Kwon’s TerraUSD algorithmic stablecoin and sister token Luna vanished in May, wiping away US$60 billion and contributing to the ongoing crypto catastrophe this year. Due to the weakening of the stablecoin’s purported peg to the US dollar, Hodlnaut’s Hong Kong branch lost about US$190 million when it liquidated the cryptocurrency.

In May, Kwon’s TerraUSD algorithmic stablecoin and sister cryptocurrency Luna lost US$60 billion when trust in the project collapsed, contributing to the wider crypto market crash of 2018. When Hodlnaut’s Hong Kong branch sold the stablecoin as its purported peg to the US dollar weakened, it lost over US$190 million.

The report claims that on July 21, Hodlnaut’s directors “made an about-turn” on the impact and notified the Singapore police that digital assets had been converted to TerraUSD. According to the report, a significant portion of the latter was lent out via the Anchor Protocol, a decentralized finance (DeFi) network built on the Terra blockchain.

Founded in 2019, the Singaporean firm follows in the footsteps of other startups such as Celsius, Voyager Digital, and Three Arrows Capital, all of whom suffered devastating losses after having invested in the Terra ecosystem and its doomed algorithmic stablecoin, UST.

Key documents missing

In addition, the report alleged that over 1000 documents that were deleted from Hodlnaut’s Google workplace may have provided insight into the company. The judicial managers have been unable to obtain various “key documents” relating to Hodlnaut’s Hong Kong branch, which has a debt of $82.43 million to Hodlnaut Pte in Singapore.

According to the report, about $776,292 was withdrawn by employees between July and August. Furthermore, it was noted that the Hong Kong office was the primary channel via which the firm’s investments in DeFi were made.