Crypto lending platform Hodlnaut, German exchange Nuri last to fail

The ‘crypto’ collapse continues unabated, with customers of both Singapore-based lending platform Hodlnaut and German digital asset exchange Nuri fearing for the safety of their funds.

On Monday, Hodlnaut users learned that the site “will stop withdrawals, token exchanges and deposits with immediate effect.” The unsigned statement said “recent market conditions” had forced the company 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 release said Hodlnaut was working on a recovery plan and consulting with Damodara Ong LLC on “the feasibility and timelines of our intended execution plan.” However, the message warned that “it will not be a short process.” The company plans to release an update on Friday the 19th. August.

Hodlnaut also disclosed that it had notified the Monetary Authority of Singapore (MAS) of “our intention to withdraw our license application.” In March, MAS issued an approval in principle of Hodlnaut’s application for a license for large payment institutions. On Tuesday, MAS said Hodlnaut would no longer be allowed to operate regulated services in Singapore. MAS also reminded Singaporeans that “trading cryptocurrency is very dangerous.”

Customers who borrowed Hodlnaut’s digital assets used to earn the kind of outsized double-digit interest rates that, until recently, were offered by a number of other lending platforms. In June, Holdnaut reduced its prices and simultaneously introduced a new retail loan product called HODLoans, which some users took as a sign that the platform had liquidity problems and needed to raise money quickly.

Hodlnaut, which was founded in 2019 by Juntao Zhu and Simon Lee, was believed to have around $500 million in “assets under management.” However, as they are not actually a registered bank, this sum actually reflects customer loans to the platform, which now appear to have been squandered via bad loans to other platforms.

Despite the company’s public statements to the contrary, Hodlnaut Pte. Ltd was listed as an institutional client in litigation stemming from the collapse of fellow lending platform Celsius, which last month exposed a nearly $5 billion hole in its finances.

Hodlnaut also reportedly took a $187 million hit in May following the collapse of Terraform Labs and its UST/Luna tokens. Despite this blow, Hodlnaut’s LinkedIn account announced in June that the platform was “NOT all-in on UST” and Hodlnaut had “reduced risk going forward.” Ironically, this same announcement claimed “Hodlnaut is here for the long haul.”

In July, Hodlnaut again assured customers that “we take risk management in the company very seriously.” Despite the king tide engulfing other lenders, Hodlnaut claimed that all their products and services “remain unaffected and are fully operational, including interest payments, token swaps, deposits and most importantly, withdrawals.”

Hodlnaut’s suspension of withdrawals follows a similar move by Singapore-based crypto lender Vauld last month that preceded the company’s bankruptcy a few weeks later. Like Hodlnaut, Vauld suffered from the UST/Luna and Celsius failures, as well as the collapse of the digital currency hedge fund Three Arrows Capital (the latter also helped destroy Voyager Digital).

Hodlnaut is not to be confused with Magnus ‘Hodlonaut’ Granath, the Norwegian crypto troll who found himself on the receiving end of a defamation lawsuit from Dr. Craig Wright after some spectacularly bad comments online. Another main difference is that the Hodlnaut platform appears to have broken all at once, while the troll Hodlonaut takes a more incremental route.

Nuri insolvent

On Tuesday, the German stock exchange Nuri GbmH (formerly Bitwala) announced that it had filed for insolvency “due to the current challenging market developments and subsequent effects on the financial markets on Nuri’s business development.” The announcement said insolvency “became necessary to ensure the safest way forward for all our customers.”

As it works toward “developing a viable long-term restructuring concept,” Nuri assured its estimated 500,000 customers that the Euro funds in their accounts are “safe due to our partnership with Solarisbank AG.” The “temporary insolvency proceedings do not affect your deposits, cryptocurrency funds and Nuri Pot [pools of ETFs] investments” and customers can continue to deposit (if they dare) and withdraw “any funds freely at any time.”

There are a few caveats here, in that Solaris Digital Assets GmbH is responsible for coins held in custodial wallets, while Nuri also lacks access to coins held in non-custodial wallets (aka Vaults in Nuri parlance). Nuri Pots are made available to Nuri clients via Bankhaus von der Heydt, which itself is “provided, executed and settled by tradias, the state-of-the-art digital asset platform, and Bankhaus Scheich, a regulated specialist in OTC crypto trading and market making .”

Nuri was the exclusive German partner of Celsius, which lacked a local license. In June, Nuri instituted a freeze on Celsius product withdrawals by customers holding Bitcoin interest accounts at Nuri, a freeze that remains in place today.

In addition to the collapses of Celsius and UST/Luna and other “various negative developments” in cryptoville, Nuri also cited the pandemic and Russia’s invasion of Ukraine as contributing to the “significant macroeconomic headwinds” affecting the business. German media reported that Nuri had been frantically searching for additional financing or an outright buyer in recent months, but found no takers.

Bottom line: this crypto winter shows no signs of thawing anytime soon, and the implosion of the big crypto Ponzi lenders will almost certainly continue to inflict a slew of other entities that came to believe the myth that the numbers really just do. go up.

See: BSV Global Blockchain Convention panel, The Future of Digital Asset Exchanges & Investments

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