In 2021, Ardana Labs claimed that it would provide an innovative stablecoin platform for the Cardano network. The new project, called “Ardana,” will allow investors to secure cryptocurrency collateral and mint stablecoins tied to fiat currencies, including a US dollar-based token called dUSD. It raised $10 million from investors that year, but abruptly closed shop in November 2022, citing “uncertainty in financing and project timeline.”
Some investors blamed the loss on the “crypto winter” of 2022, during which many legitimate projects went bankrupt due to lack of funding in an extended bear market. However, new evidence from Web3 risk management platform Xerberus suggests there may be more to Ardana’s story than just fundraising issues.
According to Xerberus, Ardana executives likely transferred 80% of the project’s funds to a personal wallet after first trying to hide transactions by sending some through centralized exchanges. The transfers were allegedly made by CEO Ryan Motovo or some other C-level team member. Once the funds reached this wallet, the executives made a series of bad investments in cryptocurrencies, Zerberos claims. These investments resulted in a loss of approximately $4 million, which shortened the project’s runway and ultimately led to its collapse.
2) Capital is deposited into stablecoins. Ardana used this capital to invest in high-risk Ethereum-based tokens. As the bear market unfolded, prices collapsed, with Ardana losing at least $4 million USD alone on her DEX trades. pic.twitter.com/PIj5o55Flr
– Xerberus (@Xerberus_io) September 6, 2023
The rise and fall of Ardana
Ardana was first announced in the summer of 2021, and by October 2021, it had raised $10 million from venture capital firms CFund, Three Arrows Capital (3AC), and Ascension Assets. Thanks to the successful fundraising and the prominence of its backers, some investors have come to believe that Ardana’s upcoming token, DANA, will achieve significant gains in the market.
The following month, Ardana announced that it had also partnered with Near Protocol to create an asset bridge between Cardano and Near.
However, no platform or bridge for the Ardana stablecoin was ever launched, and the protocol was shut down in November 2022 without a working product. The development team stated that the closure was due to “uncertainty in financing and project timeline.” The shutdown occurred amid the FTX collapse, which made it difficult for many projects to raise funds. One of Ardana’s backers, 3AC, had also gone bankrupt a few months earlier. Given this background, many did not question the official story.
However, blockchain data and analysis conducted by Xerberus show that Ardana’s failure may have had less to do with a lack of funding and more to do with risky asset management practices by Ardana Labs administrators.
A series of questionable money
Simon Peters and Noah Detwiler, co-founders of Xerberus, told Cointelegraph that they have identified Ethereum. wallet Ardana Labs used to raise funds from the DANA Initial Coin Offering (ICO) in November 2021. It stated that links to the address were included on ICO platform Tokensoft web pages related to the token. Additionally, they claim to have identified a $1 million transaction from 3AC to this address at the time 3AC announced its investment in Ardana.
According to blockchain data, the first transaction for this account took place on September 2, 2021, when approximately 0.46 Ethereum (ETH) ($1,747 at the time) was transferred. sender Inside. This was approximately two weeks after the start date of Ardana’s first round of fundraising on August 15. Starting on September 15, the account received multiple transfers in USDC which eventually added up to millions of dollars in stablecoins.
Once the funds were collected, they were transferred to other wallets through a series of intermediary steps, Xerberus claims.
As Peters and Detwiler said, approximately $3.2 million worth of stablecoins were transferred from the fundraising wallet to the “Target Wallet” through two intermediary addresses. This amount represents approximately 30% of the total funds raised. First, the fundraising account sender The funds are transferred to what is referred to as “Proxy Wallet 1”.
After receiving the funds, Proxy Wallet 1 exchanged all stablecoins for CVX, a token used to receive fees from the Convex Finance platform. Blockchain data Offers The decentralized exchange (DEX) SushiSwap was used to make this swap.
From there the money came sender to what the Xerberus founders claim is an old personal wallet (“old address”) of founder Ardana Motovu. According to them, Motovo announced that it had made profits in the previous bull market of 2017. They found that “between $200,000 and $400,000” was in this wallet before the Ardana ICO, but the bulk of the funds it held later were from Ardana.
“When this project failed and when it failed, [Motovu] She went into a live space and said, “A lot of my personal money I made during the previous bull market in 2017.” […] “This is the money he got from this old wallet,” Detweiler explained. “The amount is about $200,000 to $400,000, no more.”
Blockchain data shows that approximately four minutes after CVX tokens were sent to the old address, it was done Transfer them to the target wallet. It is this wallet that they claim was used to purchase a variety of cryptocurrencies, ultimately causing Ardana to lose money in bad investments.
CeFi exchanges are joining the fun
In addition to the amount that was moved on-chain to Target Wallet, another $4 million was sent through centralized exchanges first, and then transferred to Target Wallet, according to the Xerberus founders.
They claim to have identified the Kraken, Coinbase, and Gate.io deposit addresses used by the Ardana team. To find them, they looked for addresses that received funds from the fundraising wallet and sent the funds to a known exchange address. For example, one title in particular Receive Funds from the fundraising wallet and only sent the funds to Coinbase 6 and Coinbase: various wallet addresses.
Once funds were sent to a central exchange, determining what happened to them became more difficult. However, the team used a variety of techniques to determine with some degree of certainty where the money went.
In some cases, the team was able to identify funds sent to Kraken and then immediately send them to another address, as 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 deposited funds to another wallet, making it unclear what the user did with the funds. Deposits sent to Coinbase and Gate.io are always sent to other wallets and pooled with other users’ tokens. Therefore, with the transactions involving these exchanges, the team could not pinpoint what happened so easily.
However, they analyzed all outgoing transactions made by each exchange within an hour of depositing the fundraising wallet into it. They found that many outgoing transactions were the same amount as deposits. For example, the fundraising wallet will deposit $220,000 worth of Tether (USDT) to Gate.io. Then, after 40 minutes, the exchange will send exactly $220,000 USDT to a different wallet. Ultimately, much of that money ended up in Target Wallet, providing what Xerberus considers strong evidence that the same user made the outgoing 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 team. “This is not UTXO [unspent transaction output] Trail or ledger trail. This is not an exact path to the blockchain. […] However, the time frames and amounts are related to each other. According to them, a total of $4 million was sent to Target Wallet through these methods, bringing the total funds sent to it to $7.2 million.
Some of the money remains, while some is spent on development
Research conducted by the Xerberus team shows that approximately $1.82 million of Ardana funds were spent on development costs associated with the project, including salaries for team members. They contacted someone they referred to as the “main contractor for the project,” who gave Ardana their portfolio address. That headline showed payments totaling $1.82 million, roughly 20% of the money raised.
Additionally, they claim that approximately $1.4 million in USDC has not been lost and is still in the possession of the project in wallet They refer to it as the “Treasure Chest” account. This account’s first transaction was an incoming transfer of 0.3 ETH, worth $562.29 at the time, which was sent to it from Target Wallet.
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He lost nearly $4 million in bad trades
According to a September 6 Xerberus report on Ardana, nearly $4 million of Target Wallet’s token balance was Lost Through bad deals. The wallet owner transferred most of the funds to two Safe (formerly Gnosis Safe) multi-signature accounts. These funds were used to place trades on the DEX platforms PancakeSwap, Uniswap, SushiSwap, and GMX, resulting in almost complete losses. Target Wallet also made its losing trades.
Blockchain data shows that Target’s wallet performed more than 1,000 transactions, most of which were interactions with DEX contracts.
Liquidation and closure of Ardana
Xerberus claims that the Ardana team’s on-chain behavior began to change in March 2022, when the team’s wallets began “dumping” their assets onto DEX platforms. They continued to sell all remaining assets until November 2022, at which point the project officially announced its closure. The money obtained from these sales is still in the treasury wallet.
The company says it has created an early warning system that can help alert investors when a project engages in risky behavior that could lead to closure. Xerberus calls this “native Blockchain risk ratings based on verifiable mathematics,” and says investigations like Ardana’s are used to “fine-tune” its risk model, which it expects to “transform cryptocurrency markets, making them the safest alternative to traditional markets.” financial markets.”
Cointelegraph tried to contact Ardana’s company Motovu via LinkedIn, hoping to get his side of the story. No response was received during the two weeks prior to publication.
Many Ardana investors were strong believers in the Cardano ecosystem. They expected Ardana to be the project that would finally get Cardano the attention they felt it deserved. Instead, over $10 million in capital was sucked out of the Cardano community, leaving almost nothing left to show for it in the end.
Ardana’s story is a sobering reminder of the risks of investing in new Web3 startups without an effective product. Although these projects can lead to huge gains, they can also lead to catastrophic losses. Investors may want to take a closer look at project behavior across the chain when considering investing in these types of projects.
Cointelegraph editor Zhiyuan Sun contributed to this story.
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