Ardana Labs’ Collapse: Mismanaged Funds and Risky Investments at Heart of Shutdown, says Xerberus
Summary:
Ardana Labs, which had plans to introduce an innovative stablecoin platform to the Cardano network, ceased operations in 2022 after raising $10 million a year prior. The shutdown was officially attributed to uncertainties around funding and the project timeline. However, Xerberus' investigation alleges poor decisions from Ardana's executives are to blame. It suggests that 80% of the project's collected funds, guided through a series of transactions to obscure their movement, were funneled into personal wallets. It further implicates these accounts in risky and unfortunate crypto investments, resulting in the loss of roughly $4 million, a factor in Ardana's downfall. These revelations underscore the risks of investing in startups with no functioning product.
In 2021, Ardana Labs declared its plans to bring an advanced stablecoin system to the Cardano network. This revolutionizing project, known as “Ardana,” aimed to enable traders to deposit cryptocurrency collateral and generate fiat-tied stablecoins, incorporating a U.S. dollar-tied token named dUSD. It received an impressive $10 million from financiers within the same year, but unexpectedly ceased operations in November 2022, alluding to issues regarding funding and project course ambiguities. Some stakeholders credited this downfall to the notorious “crypto winter” of 2022, a period which saw many authentic businesses collapse from insufficient funding in the drawn-out bearish market. However, fresh facts from Web3 hazard-management system Xerberus imply that there could be more circumstances involved in Ardana’s situation than just fundraising challenges.
As per Xerberus, it’s likely that Ardana's leaders transferred 80% of the project’s cumulative funds to a personal wallet following an initial effort to disguise the transactions by routing some through centralized exchanges. These wealth transfers were supposedly managed by CEO Ryan Motovu or another high-ranking executive. After the funds were shifted to this wallet, these executives made a series of unfortunate cryptocurrency investments, Xerberus speculates. These ventures led to a loss of about $4 million, significantly reducing the project's longevity and eventually leading to its demise.
Ardana started making headlines in the summer of 2021 and had secured $10 million from VC firms such as CFund, Three Arrows Capital (3AC) and Ascensive Assets by October 2021. The successful fundraising and the reputation of its backers caused investors to anticipate high market returns from Ardana’s forthcoming token, DANA. The next month, Ardana revealed a partnership with Near Protocol aimed to establish an asset bridge linking Cardano and Near.
Nevertheless, Ardana’s stablecoin platform or bridge was never initiated, and the protocol ceased operations in November 2022 without a functioning product. The development team accredited the termination to “funding and project timeline uncertainty.” This came during the failing of FTX, thereby making funding difficult for many ventures. One of Ardana's backers, 3AC, also declared bankruptcy a few months before. Given this context, many did not dispute the official explanation.
However, blockchain data and Xerberus' analysis suggest that Ardana's failure may be less about inadequate funding and more about perilous asset management by Ardana Labs' executives.
The Xerberus founders Simon Peters and Noah Detwiler exposed the Ethereum wallet that Ardana Labs used to amass funds from the DANA initial coin offering (ICO) in November 2021. They added that this address was referenced in the ICO platform Tokensoft's web pages associated with the token. They also claim to have pinpointed a $1 million transaction from 3AC into this address when 3AC had declared its Ardana investment.
In addition to the capital moved to the so-called Target Wallet on record, an additional $4 million was migrated through centralized exchanges first, then transferred to the Target Wallet, according to the Xerberus creators.
The Xerberus team's research indicates that roughly $1.82 million of Ardana’s funds were spent on development costs, including team remunerations. About $1.4 million of USDC is assumed to still be unspent, and the project reportedly holds this in the wallet referred to as the “Treasure Chest” account.
Xerberus' report on Ardana, dated Sept. 6, reveals the Target Wallet's token balance lost nearly $4 million through bad trades. The wallet holder moved most of the funds to two Safe (formerly Gnosis Safe) multisignature accounts. These funds were used to carry out transactions on DEXs PancakeSwap, Uniswap, SushiSwap, and GMX, ending in almost complete losses.
Many Ardana financiers had high hopes for the Cardano network and expected Ardana to be the project that would finally elevate Cardano to its deserved status. Unfortunately, the Cardano community lost over $10 million in capital with practically nothing to demonstrate.
Ardana's unfortunate tale is a harsh reminder of the pitfalls of investing in new Web3 startups without a functioning product. Although these projects could yield outsized earnings, they could also result in disastrous losses. Investors might find it beneficial to thoroughly examine a project's on-chain behavior before making an investment decision.
Published At
10/3/2023 8:59:00 PM
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