In 2021, Ardana Labs claims to provide an innovative stablecoin platform for the Cardano network. The new project, called “Ardana,” will allow investors to lock up cryptocurrency collateral and mint stablecoins pegged to fiat currencies, including a U.S. dollar token called dUSD. The company raised $10 million from investors that year, but abruptly closed its doors in November 2022, citing “uncertainty about funding and project timelines.”
Some investors blame the losses on the “crypto winter” of 2022, during which many legitimate projects went bankrupt due to a lack of funds in a prolonged bear market. However, new evidence from Web3 risk management platform Xerberus suggests the Ardana story may be about more than just fundraising.
According to Xerberus, Ardana executives may have moved 80% of the project’s funds to personal wallets after first trying to hide the transactions by sending some funds through a centralized exchange. The transfer was allegedly made by CEO Ryan Motovu or other C-level team members. Xerberus alleges that once the funds entered the wallet, executives made a series of poor cryptocurrency investments. Those investments resulted in a loss of approximately $4 million, shortening the project’s runway and ultimately causing its collapse.
2) Funds are deposited in the form of stable coins. Ardana used the funds to invest in high-risk Ethereum-based tokens. As the bear market price plummeted, Ardana lost at least $4 million on DEX trading alone. pic.twitter.com/PIj5o55Flr
— Xerberus (@Xerberus_io) September 6, 2023
The Rise and Fall of Adana
Ardana first announced in the summer of 2021 that by October 2021 it had raised $10 million from venture capital firms CFund, Three Arrows Capital (3AC) and Ascending Assets. Due to its successful fundraising and the popularity of its backers, some investors have begun to believe that Ardana’s upcoming token DANA will bring huge market gains.
The following month, Ardana announced that it was also partnering with Near Protocol to build an asset bridge between Cardano and Near.
However, the Ardana stablecoin platform or bridge never launched, and the protocol shut down in November 2022 without any functional products. The development team said the closure was due to “uncertainty about funding and project timelines.” The shutdown comes amid the collapse of FTX, which has left many projects struggling to raise funds. One of Ardana’s backers, 3AC, also went bankrupt a few months ago. Given this context, many did not question the official account.
However, Xerberus’ blockchain data and analysis suggests that Ardana’s failure may have less to do with a lack of funding and more to do with the risky asset management practices of Ardana Labs officials.
Traces of suspicious funds
Xerberus co-founders Simon Peters and Noah Detwiler told Cointelegraph they identified Ethereum wallet Ardana Labs raised funds from the DANA Initial Coin Offering (ICO) in November 2021. They said that the token-related webpage of ICO platform Tokensoft contained a link to the address. Additionally, they claim to have discovered a $1 million transaction from 3AC to the address when 3AC announced its Ardana investment.
According to blockchain data, the account’s first transaction occurred on September 2, 2021, when approximately 0.46 ether (ETH) ($1,747 at the time) was traded. transmit Go in. This comes about two weeks after Ardana’s first round of fundraising began on August 15. Beginning on September 15, the account received multiple USD Coin (USDC) transfers, ultimately totaling millions of dollars worth of stablecoins.
Xerberus claims that once funds are raised, they are transferred to other wallets through a series of intermediate steps.
According to Peters and Detwiler, approximately $3.2 million worth of stablecoins were transferred from the fundraising wallet to the “target wallet” through two intermediate addresses. This amount represents approximately 30% of the total funds raised.1. Donation account transmit Deposit funds into what they call “Agent Wallet 1”.
After receiving funds, Proxy Wallet 1 exchanges all stablecoins for CVX, the utility token used to collect fees from the Convex Finance platform.Blockchain data programme The decentralized exchange (DEX) SushiSwap is used to conduct this exchange.
From there, funds are transmit The founder of Xerberus claimed that this was the old personal wallet (“old address”) of Ardana founder Motovu. According to them, Motovu claimed to have made money during the last bull market in 2017. They found the wallet had “$200,000 to $400,000” in it before the Ardana ICO, but later most of the funds it held came from Ardana.
“When the plan ran into trouble and failed, (Motovu) said in the live broadcast space, ‘A lot of the personal money I made in the last bull market in 2017’ (…) was money he made from this old wallet, ” Detwiler explained. “It totaled about $200,000 to $400,000 and that was it.”
Blockchain data shows that approximately four minutes after CVX tokens were sent to the old address, transfer in Send them to Target wallet. They claim it was this wallet that was used to purchase various cryptocurrencies, ultimately causing Adana to lose his funds to bad investments.
CeFi exchange joins testing ranks
The Xerberus co-founder said that in addition to the amount transferred on-chain to the Target wallet, another $4 million was first sent through the centralized exchange and then transferred to the Target wallet.
They claim to have identified the Kraken, Coinbase and Gate.io storage addresses used by the Ardana team. To find these, they look for addresses that receive funds from fundraising wallets and send funds to known transaction addresses.For example, a specific address received Withdraw funds from your fundraising wallet and only send funds to Coinbase 6 and Coinbase: Miscellaneous wallet addresses.
Once funds are sent to a centralized exchange, it becomes more difficult to determine what happens to them. However, the team used a variety of techniques to determine, to some extent, where the money was going.
In some cases, the team was able to identify funds sent to Kraken and then immediately sent to another address, as Kraken often uses the same address to send and receive funds for every user, especially when the time between transactions is short. situation. In other cases, Kraken sends deposited funds to another of its wallets, making it no longer obvious to users what was done with the funds. Deposits sent to Coinbase and Gate.io are always sent to other wallets and merged with other users’ coins. Therefore, for transactions involving these exchanges, the team cannot easily determine what happened.
However, they analyzed all outgoing transactions made within an hour of the fundraising wallet being deposited on each exchange. They found that many outgoing transactions were for the exact same amount as the deposits. For example, a fundraising wallet will deposit $220,000 worth of Tether (USDT) to Gate.io. Then, 40 minutes later, the exchange sent $220,000 in USDT to another wallet. Ultimately, the majority of these funds ended up in Target wallets, providing solid evidence that Xerberus believes the same user made the outgoing transactions.
Peters and Detwiler cautioned that this process does not determine whether a transaction was made by a Motovu or Ardana team member. “This is not a UTXO (unspent transaction output) trace or a ledger trace. This is not a precise trace of the blockchain. (…) However, the time frame and the amount do correlate with each other,” Detwiler said. According to them, a total of $4 million was sent to Target wallets through these methods, bringing the total amount of funds sent to Target wallets to $7.2 million.
Some of the funds are retained and some are used for development
Research conducted by the Xerberus team showed that approximately $1.82 million worth of Ardana funding was used for development costs associated with the project, including team member salaries. They contacted a person they described as “the main contractor on the project,” who provided Adana with their wallet address. The address shows payments totaling $1.82 million, or about 20% of the funds raised.
Additionally, they claim that USDC worth approximately $1.4 million has not been lost and is still held by the project. wallet They call it a “treasure box” account. The first transaction to the account was a transfer of 0.3 ETH, worth $562.29 at the time, sent to the account from the Target wallet.
related: Multi-chain victims seek answers in $1.5B vulnerability as new evidence emerges
Bad trades cost nearly $4 million
According to a Sept. 6 Xerberus report on Ardana, Target wallets have nearly $4 million in token balances lost Through bad transactions. The wallet owner moved the majority of the funds to two Safe (formerly Gnosis Safe) multi-signature accounts. The funds were used to trade on DEX PancakeSwap, Uniswap, SushiSwap and GMX, and almost all were lost. Target Wallet itself made losing trades.
Blockchain data shows that Target Wallet conducted 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 wallet began “dumping” its assets onto the DEX. They continued to sell off all remaining assets until November 2022, when the project was officially announced to be closed. The funds obtained from these sales remain in the treasury wallet.
The company said it created an early warning system to help alert investors if projects exhibit risky behavior that could lead to closure. Xerberus calls this a “blockchain-native risk rating based on verifiable mathematics,” and says surveys like Ardana’s are used to “fine-tune” its risk model, which it expects will “transform the cryptocurrency market into a traditional currency safe alternatives to the market”. Financial market. “
Cointelegraph attempted to contact Ardana’s Motovu via LinkedIn to get his side of the story. No response was received within two weeks of publication.
Many Adana investors are strong believers in the Cardano ecosystem. They hope that the Ardana project will finally give Cardano the attention they believe it deserves. Instead, over $10 million in capital was siphoned away from the Cardano community, ultimately leaving almost nothing to show for it.
Ardana’s story is a sobering reminder of the risks of investing in new Web3 startups without functional products. While these projects can bring huge gains, they can also lead to catastrophic losses. Investors may want to carefully study the project’s on-chain behavior when considering whether to invest in such a project.
Cointelegraph editor Sun Zhiyuan contributed to this report.
related: Binance hesitates to freeze wallets, sparking controversy amid $11M heist
Svlook
