Nearly three years after the Terra ecosystem imploded and took a sizable chunk of the crypto lending industry with it, Singapore is finally pressing criminal charges against one of the executives at the center of it all.

Zhu Juntao, the 36-year-old former CEO of crypto lending platform Hodlnaut, has been charged with six counts of fraud by false representation. The charges stem from statements Zhu and Hodlnaut employees allegedly made to users between May and July 2022, downplaying, and in some cases outright denying, the platform’s exposure to TerraUSD after it lost its dollar peg and cratered to near zero.

What Zhu allegedly told users versus what actually happened

When TerraUSD collapsed in May 2022, Hodlnaut users wanted to know if their deposits were safe. According to Singapore’s Commercial Affairs Department, Zhu told them they were.

Through Telegram messages, emails, and his personal social media accounts, Zhu allegedly claimed that Hodlnaut had no direct losses from UST. Hodlnaut had reportedly suffered approximately $190 million in losses tied to the Terra collapse.

Three of the six charges fall under Section 424A(1)(a) read with Section 424A(3) of Singapore’s Penal Code 1871, targeting false representation directly. The other three charges invoke the same provision but are read with Section 109, which covers the instigation of others. In plain terms, Zhu is accused not only of lying himself but also of directing employees to make misleading statements.

Each count carries a maximum penalty of 20 years imprisonment.

The timeline of Hodlnaut’s unraveling

Hodlnaut launched in 2019 as one of many platforms promising users attractive yields on their crypto deposits.

Between May and July 2022, Zhu allegedly kept reassuring users that the platform was unscathed. Then, on August 9, 2022, Hodlnaut suspended all withdrawals, deposits, and token swaps. The platform entered judicial management, the Singaporean equivalent of a court-supervised restructuring, as management tried to figure out what could be salvaged.

Hodlnaut was ultimately liquidated in November 2023, leaving more than 17,000 users and creditors holding the bag.

Singapore police began investigating in November 2022 after receiving reports of potentially fraudulent representations about the company’s UST exposure. That investigation has now culminated in the charges against Zhu, marking the first criminal prosecution of Hodlnaut’s leadership tied to its post-Terra disclosures.

What this means for crypto investors

The Hodlnaut case is specifically focused on what leadership told users after the damage was done: did the CEO lie to users about the platform’s financial health to prevent a bank run, and did those lies cause users to keep their money on the platform when they otherwise would have withdrawn? Hodlnaut users who trusted Zhu’s reassurances in those critical weeks between May and August 2022 lost their window to exit before withdrawals were frozen.