Ardana Labs, a stablecoin project on the Cardano blockchain, suddenly closed its doors in November 2022, citing funding and project timeline uncertainty. Investors blamed the failure of the 2022 crypto winter, but new findings from Web3 risk management platform Xerberus suggest Ardana instead gambled away their resources unsuccessfully.
Many were firm believers in the Ardana project, which allowed investors to lock up crypto collateral and mint fiat-pegged stablecoins in the Cardano ecosystem. The project received funding from 75 investors, including prominent venture capital firms CFund, Three Arrows Capital (3AC) and Ascensive Assets.
These investors provided Ardana with $10 million to kickstart its development by October 2021. They believed that DANA, Ardana’s upcoming token, would return outsized market gains.
However, Ardana shut down its protocol without ever releasing a functioning stablecoin platform or bridge. Its closure happened amid the collapse of FTX, which also prompted other projects to shut down.
Xerberus, a blockchain data analytics platform, released a report regarding Ardano Labs’ asset management practices in September.
Titled “The Life and Death of Ardana,” the platform suspected that Ardana’s failure might have been the result of inappropriate handling of resources and had nothing to do with FTX’s collapse. Ardana’s administrators had never sent a considerable amount of money to the now-bankrupt exchange.
Xerberus followed the outbound payments from Ardana’s address and found that 80 percent of the investment money had been circulated into personal wallets. Xerberus suspected that the transfers had been either performed by Ardana’s CEO, Ryan Motovu or other C-level executives.
Roughly $3.2 million in stablecoins was moved to a target wallet through two between-station addresses. Another $4 million was gone after trading out for CVX tokens, sent to a wallet presumed to belong to Motovu and then moved to the target wallet. This was done by obscuring the transactions via several centralized exchanges, such as Kraken, Coinbase and Gate.io.
Xerberus found that Ardana had exchanged stable assets for highly volatile ones during potentially significant price drops.
“Ardana seemingly failed because of contempt for risk management and greed,” the report reads. “There was absolutely no reason for Ardana to take this risk other than the greed to turn 10 million into 20 as soon as possible.”
Blockchain data show that Target Wallet made over 1,000 transactions, most of which were interactions with DEX contracts. This continued until the project officially announced it was closing.
Xerberus also revealed that not all of the funds were lost. It found one wallet within the Ethereum cluster that still contained $1.4 million worth of digital assets, maintaining that there might be others that had yet to be discovered.
The Ardana incident was a painful hit for investors. Xerberus’ report serves as a warning for the industry to evaluate the risks of investing in Web3 startups with no functioning product.
Many have reacted to the report, including Web3 game studio Cardania. “Every supposedly well-curated Cardano social platform and influencer hyped it for weeks,” it said. “Too many are hypnotized by the business gloss and tautology: “They appear to have money, thus they will make money.”
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