Investors gambling out their money before the Cardano stablecoin project carpet: Report
In the year By 2021, Ardana Labs says it will provide an innovative stablecoin platform for the Cardano network. Called “Ardana,” the new project will allow investors to lock in crypto-collateral and mint fiat-pegged stablecoins, including a US dollar-based token called dUSD. It raised $10 million from investors that year, but abruptly closed shop in November 2022, citing “funding and project timeline uncertainty.”
Some investors blamed the loss on the “crypto winter” of 2022, during which many legitimate projects fell short of funding during an extended bear market. However, new data from Web3 risk management platform Zerberus suggests that there may be more to Ardana's story than just fundraising issues.
According to Zerberus, Ardana executives transferred 80% of the project's funds to private wallets after trying to obscure the transaction by sending some of it through a centralized exchange. The transfers were made by CEO Ryan Motovu or another member of the C-level team. Once the funds were in this wallet, the executives made a series of bad crypto investments, Zerberus said. These investments resulted in a loss of nearly $4 million, shortening the project's runway and ultimately leading to its failure.
2) The capital is placed in statscoins. Ardana used this capital to invest in highly risky Ethereum-based tokens. Ardaana lost at least $4 million in their DX trade due to falling prices in a bear market. pic.twitter.com/PIj5o55Flr
— Xerberus (@Xerberus_io) September 6, 2023
The rise and fall of Ardana
Ardana was first announced in 2011. In the summer of 2021, it raised $10 million from venture capital firms CFund, Three Arrows Capital (3AC) and Ascensive Assets in October 2021. Thanks to the successful fundraising and the popularity of its supporters, some investors believe that Ardana's upcoming token DANA will generate more profit than the market.
Next month, Ardana announced that it will partner with NearProtocol to create an asset bridge between Cardano and NearProtocol.
However, no Ardana stablecoin platform or bridge was launched and the protocol was shut down in November 2022 without a working product. The development team said it was shut down due to “uncertainty about funding and project timelines.” The closure occurred during the FTX recession, which made it difficult to raise funds for many projects. 3AC, one of Ardana's fans, also happened a few months ago. Against this background, many did not question the official story.
But blockchain data and Zerberus analysis show that Ardana's collapse may have had less to do with a lack of funds and more to do with risky asset management practices by Ardana Labs officers.
Suspicious money trail
Xerberus co-founders Simon Peters and Noah Detwiler told Cointelegraph that they identified Ardana Labs, the Ethereum wallet used to raise funds from DANA's initial coin offering (ICO) in November 2021. They stated that links to the address are included in the ICO platform Tokensoft's website. Pages related to tokens. Additionally, they identified a $1 million transaction from 3AC to this address at the same time that 3AC announced its Aranda investment.
According to blockchain data, the first transaction made to this account was on September 2, 2021, when approximately 0.46 Ether (ETH) ($1,747 at the time) was sent in. This was two weeks after the first round of Ardana fundraising was launched on August 15. Since September 15th, the account has received many USD Coin (USDC) transfers, eventually amounting to millions of dollars worth of stablecoins.
After the funds are collected, they are transferred to other wallets through a series of intermediate steps, Zerberus says.
According to Peters and Detwiler, about $3.2 million worth of stablecoin was moved from the fundraising wallet to a “Target wallet” at two intermediate addresses. This amount is about 30% of the total amount raised. First, the fundraising account sends the funds to what they call “Proxy Wallet 1”.
After receiving the funds, Proxy Wallet 1 exchanged all stablecoins for CVX, the utility token used to receive payments from the Convex Financial platform. Blockchain data shows that decentralized exchange (DEX) SushiSwap was used to make this exchange.
The funds were then sent to what the Zerberus founders called the old personal wallet of Ardana founder Motovu (“old address”). According to them, Motovu claimed to have made money during the previous bull market in 2017. They discovered that he had between $200,000 and $400,000 in his wallet before the Ardana ICO.
“When this project works and fails, [Motovu] He went live and said, ‘Most of my personal money I made in the previous bull market of 2017.' […] He made money from this old wallet,” Detwiler explained. “It includes something around $200,000 to $400,000, nothing more.”
Blockchain data shows that the CVX tokens transferred to the target wallet four minutes after they were sent to the old address. This wallet was said to be used to buy various cryptocurrencies and eventually led to the loss of Ardana's money due to bad investments.
CeFi exchanges join the trail
In addition to the money transferred on-chain to the target wallet, another $4 million was first sent through centralized exchanges and then transferred to the target wallet, according to the Zerberus co-founders.
They claim to have identified Kraken, Coinbase and Gate.io deposit addresses used by the Ardana group. To find these, they look for addresses that have received money from a crowdfunding wallet and send money to a known exchange address. For example, one address specifically received funds from the Coinbase wallet and sent the funds to Coinbase 6 and Coinbase: Different wallet addresses only.
Determining what happened to funds once they were sent to a central exchange became more difficult. However, the team used different techniques to determine exactly where the money went.
In some cases, the team was able to identify funds sent to Kraken and immediately sent to another address because Kraken often uses the same address to send and receive funds for each user, especially if the time between transactions is short. In other cases, Kraken sent the stored funds to another wallet, leaving it unclear what the user did with the funds. Deposits sent to Coinbase and Gate.io are always sent to other wallets and mixed with other users' tokens. Therefore, in transactions involving these exchanges, the group could not easily detect what had happened.
However, the fundraiser analyzed all spent transactions made by each exchange within an hour of the wallet being maintained. They found that many outgoing transactions have the same amount as deposits. For example, the fundraising wallet deposits $220,000 worth of Tether (USDT) into Gate.io. Then 40 minutes later, the exchange sends exactly $220,000 in USDT to another wallet. Ultimately, most of these funds end up in the target's wallet, which Cerberus sees as strong evidence that the user has made spending transactions.
Peters and Detwiler cautioned that this process does not definitively prove that the transactions were made by Motovu or a member of the Ardana group. “This is not a UTXO. [unspent transaction output] Path or ledger path. This is not the true way of blockchain. […] However, the time frames and amounts are related to each other, “said Detwiler. A total of $4 million was sent to the target purse through these methods, which brings the amount of money sent to $7.2 million.
Some funds remain, but some are spent on development
According to research by the Cerberus team, about $1.82 million in Aranda funds are associated with the project for development costs, including team member salaries. They spoke to a man they described as the “main contractor for the project” who gave Ardana the wallet address. This address showed a total of $1.82 million in payouts, about 20 percent of the total amount raised.
Additionally, they claim that approximately $1.4 million USD is unaccounted for and still in the hands of the project in a wallet they call a “treasure chest”. The first transaction for this account was a transfer of 0.3 ETH worth $562.29 at the time, which was sent from the target wallet.
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About 4 million dollars were lost due to bad business
According to a Cerberus report on Ardana on September 6, nearly $4 million in Target Wallet token balance was lost due to bad trading. The wallet owner transferred most of the funds to two Safe (formerly Gnosis Safe) multi-signature accounts. These funds were used to trade on the DEXs PancakeSwap, Uniswap, SushiSwap and GMX, resulting in total losses. Target Wallet also made its own losing trade.
Blockchain data shows that the target wallet has made more than 1,000 transactions, most of which were transactions with DEX contracts.
Ardana discharge and closure
Zerberus says that the behavior of the Ardana team on the chain began to change in March 2022, when the team's wallets began “dumping” their assets on DEXs. They continued to sell off the remaining properties until November 2022, at which point the project was officially announced as closed. The proceeds from these sales still remain in the treasury's coffers.
The company says it has developed an early warning system to help alert investors when a project is engaging in risky behavior that could lead to closure. Zerberus calls this “Blockchain Native Risk Ratings based on verified accounts” and says investigations like Ardana will be used to “calibrate” the risk model, which will “transform crypto markets, making them a safer alternative to traditional ones.” Money Markets”
Cointelegraph tried to contact Ardanan Motovu on LinkedIn, hoping to get his side of the story. No response was received within two weeks of publication.
Many Ardana investors have been firm believers in the Cardano ecosystem. Ardana finally expected Cardano to become the attention-grabbing project it deserves. Instead, more than $10 million in capital had flown out of the Cardano community, with nothing left to show for it in the end.
Ardana's story is a sobering reminder of the dangers of investing in new Web3 startups with no working product. Although these projects can generate excessive profits, they can lead to catastrophic losses. Investors may want to take a closer look at the nature of the project chain when considering investing in these types of projects.
Cointelegraph editor Zhiyuan Sun contributed to this story.
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