In 2021, Ardana Labs claimed to provide an innovative stablecoin platform for the Cardano network. The new project, called Ardana, will allow investors to lock up their crypto assets and mint fiat-pegged stablecoins, including a USD-based token called dUSD. It raised $10 million from investors that same year, but abruptly closed its doors in November 2022, citing “uncertainty in financing and project schedules.”
Some investors have blamed the losses on the 2022 “crypto winter,” during which many legitimate projects collapsed due to lack of funding during a prolonged bear market. But new evidence from Web3 risk management platform Xerberus suggests there may be more to Ardana’s story than just funding issues.
According to Xerberus, Ardana executives likely moved 80% of the project’s funds into personal wallets after first attempting to hide the transactions by transferring some through a centralized exchange. The move was reportedly made by CEO Ryan Motovu or other members of the executive team. Once the funds were deposited into this wallet, Xerberus alleges, the executives made a series of nefarious crypto investments. These investments resulted in approximately $4 million in losses, shortened the project’s runway, and ultimately led to the project’s collapse.
2) Capital was deposited in a stablecoin. Aldana used this money to invest in high-risk Ethereum-based tokens. Prices collapsed just as the bear market arrived, and Ardana lost at least $4 million of his money on his DEX trades alone. pic.twitter.com/PIj5o55Flr
— Xerberus (@Xerberus_io) September 6, 2023
The rise and fall of Aldana
Ardana was first announced in summer 2021 and by October 2021 had raised $10 million from venture capital firms CFund, Three Arrows Capital (3AC), and Ascensive Assets. Thanks to the success of the fundraising and the prominence of the backers, some investors have come to believe that Ardana’s upcoming token, DANA, will bring significant gains to the market.
The following month, Ardana announced that it would also partner with Near Protocol to build an asset bridge between Cardano and Near.
However, the Ardana stablecoin platform or bridge was never launched, and the protocol was shut down in November 2022 without a functioning product. The development team cited “uncertainty in funding and project schedule” as the reason for the closure. The closure came amid FTX’s collapse, making it difficult for many projects to obtain financing. One of Ardana’s backers, 3AC, also went bankrupt several months ago. Given this background, many did not question the official story.
However, blockchain data and analysis by Xerberus indicate that Ardana’s failure may have less to do with a lack of funding and more to do with risky asset management practices by Ardana Labs executives.
suspicious money traces
Xerberus co-founders Simon Peters and Noah Detwiler told Cointelegraph that they have identified Ethereum. wallet Ardana Labs had raised funds from the DANA Initial Coin Offering (ICO) in November 2021. They said a link to that address was included on the webpage of Tokensoft, the ICO platform associated with the token. Additionally, they claim they identified his $1 million transaction from 3AC to this address at the time 3AC announced its investment in Ardana.
According to blockchain data, the first transaction into this account occurred on September 2, 2021, when approximately 0.46 Ether (ETH) ($1,747 at the time) was traded. sent there. This was about two weeks after his Aug. 15 launch of the first round of Ardana funding. Since September 15th, this account has received multiple USD Coin (USDC) transfers, ultimately amounting to millions of dollars worth of stablecoins.
Once the funds were raised, they were transferred to other wallets through a series of intermediate steps, Xerberus claims.
According to Peters and Detwiler, approximately $3.2 million worth of stablecoins were moved from the fundraising wallet to a “target wallet” via two intermediate addresses. This amount represents approximately 30% of the funds raised.Start with your fundraising account sent The funds are transferred to what is called “Proxy Wallet 1”.
After receiving the funds, Proxy Wallet 1 exchanged all stablecoins into CVX, a utility token used to receive fees from the Convex Finance platform.blockchain data show The decentralized exchange (DEX) SushiSwap was used for this swap.
The funds were raised from sent What the Xerberus founders claim is Ardana founder Motovu’s old personal wallet (the “Old Address”). According to them, Motovu declared that he made money during the last bull market in 2017. They discovered that the wallet had “between $200,000 and $400,000” in it before the Ardana ICO, but the majority of the funds held afterward came from Ardana.
“When this project fails and fails, [Motovu] Appearing on Live Space, he said, “I spent most of my personal money that I earned during the last bull market in 2017.” […] That’s the money he made from this old wallet,” Detwiler explained. “It adds up to about $200,000 to $400,000, but no more.”
According to blockchain data, approximately 4 minutes after the CVX token was sent to the old address; transferred Add them to your target wallet. They allege that this wallet was used to purchase various cryptocurrencies and ultimately caused Aldana’s funds to be lost in fraudulent investments.
CeFi Exchange Joins the Trail
In addition to the amount moved on-chain to Target Wallet, an additional $4 million was first transferred through a centralized exchange and then transferred to Target Wallet, according to the Xerberus co-founders.
They claim to have identified Kraken, Coinbase, and Gate.io deposit addresses used by the Ardana team. To find these, they looked for addresses that received funds from fundraising wallets and transferred funds to known exchange addresses.For example, a specific address received Funds will be sent from your fundraising wallet and will only be sent to Coinbase 6 and Coinbase: Miscellaneous wallet addresses.
Once funds are sent to a centralized exchange, it becomes even more difficult to determine what happened to them. But the team used a variety of techniques to determine with some degree of certainty where the money would go.
In some cases, especially if the time between transactions is short, Kraken often uses the same address to send and receive funds for each user, so the team can transfer funds sent to Kraken and immediately sent to another address. I was able to identify it. In other cases, Kraken transferred the deposited funds to another wallet, making it no longer clear 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. So for trades involving these exchanges, the team could not easily determine what happened.
However, we analyzed all outgoing transactions made on each exchange within an hour of the funding wallet being deposited. They found that many transfer transactions were for exactly the same amount as the deposit. For example, a fundraising wallet he deposits $220,000 worth of Tether (USDT) into Gate.io. And after 40 minutes, the exchange sends him just $220,000 in USDT to another wallet. Eventually, many of these funds will be transferred to the target wallet, which Xerberus believes will provide hard evidence that the same user made the outgoing transaction.
Peters and Detwiler cautioned that this process does not reliably prove that the transaction was made by a member of the Motovu or Ardana team. “This is not a UTXO” [unspent transaction output] Trail or leisure trail. This is not an accurate blockchain trail. […] However, the period and amount are interrelated,” Detwiler said. According to them, a total of $4 million was transferred to the target wallet through these methods, bringing his total transfers to $7.2 million.
Part of the funds will remain, but part was spent on development
Research conducted by the Xerberus team indicates that approximately $1.82 million worth of Ardana’s funding was spent on development costs associated with the project, including team member salaries. They contacted a person they called the “prime contractor of the project,” who gave Aldana the wallet address. Payments totaling $1.82 million were shown at this address, about 20% of the funds raised.
Additionally, they claim that approximately $1.4 million worth of USDC was not lost and remains property of the project. wallet They call it a “treasure chest” account. The first transaction on this account was a transfer of 0.3 ETH, worth $562.29 at the time, sent from the target wallet.
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Nearly $4 million lost in fraudulent transactions
According to Xerberus’ Sept. 6 report on Ardana, nearly $4 million of Target Wallet’s token balances are lost Through bad deals. The wallet owner transferred the majority of the funds to his two Safe (formerly Gnosis Safe) multi-signature accounts. These funds were used to trade the DEXs PancakeSwap, Uniswap, SushiSwap, and GMX, resulting in almost total losses. The target wallet also made its own loss-making trades.
According to blockchain data, more than 1,000 transactions took place in the target wallet, most of which were with DEX contracts.
Liquidation and closure of Aldana
Xerberus claims that the Ardana team’s on-chain behavior began to change in March 2022, when the team’s wallets began “dumping” assets into the DEX. They announced that they would continue to sell off all remaining assets until November 2022, at which point the project would officially end. The funds from these sales still remain in the Treasury wallet.
The company says it has created an early warning system to help alert investors if a project is engaging in risky practices that could lead to closure. Xerberus calls this a “native risk assessment for blockchains based on verifiable mathematics,” and studies like Ardana are used to “fine-tune” risk models, thereby allowing “cryptocurrency We look forward to transforming the market and providing a safe alternative to the traditional cryptocurrency market.” financial market. “
Cointelegraph attempted to contact Aldana’s Motobu via LinkedIn in hopes of hearing his side of the story. He did not respond within two weeks until publication.
Many Ardana investors were strong believers in the Cardano ecosystem. They hoped that Ardana would eventually become the high-profile project that Cardano deserved. Instead, over $10 million of capital was siphoned from the Cardano community, leaving virtually nothing in the end.
Ardana’s story is a sobering reminder of the risks of investing in new Web3 startups without a working product. These projects can lead to huge profits, but they can also lead to devastating losses. Investors may want to take a closer look at a project’s on-chain operations when considering whether to invest in this type of project.
Cointelegraph Editor Zhiyuan Sun contributed to this article.
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