Thousands of trade finance transactions on Triterras’ blockchain-based Kratos platform can be viewed publicly, without any specialist knowledge or equipment, GTR can reveal.

Shares in the Singapore-based fintech plummeted in January after US short sellers claimed nearly two-thirds of Kratos transactions between June 2019 and August 2020 were carried out by companies controlled by or linked to Triterras directors.

The short seller report, published by newly formed hedge fund Phase 2 Partners, said it analysed records of Triterras transactions that are stored on the Ethereum blockchain, and produced data on who is using the platform, what cargo is being traded and the value of those sales.

Based on that research, it claimed that the number of active participants on the Kratos platform was far lower than the 66 reported by Triterras – estimating a total of 39 once subsidiaries are eliminated.

It also said that 64% of transactions directly involved Rhodium Resources or Longview Resources. Rhodium’s founder and CEO is Srinivas Koneru, also founder and chief executive of Triterras, while Longview is headed by Rick Maurer, whose special-purpose acquisition company Netfin acquired Triterras last year.

Reassuring investors about those claims, Koneru said he believed they were the result of “coordinated market manipulation” in comments made at an online event hosted by B. Riley Securities on January 28.

“We can state that the data in the short report is incomplete,” Koneru said, adding that “very sensitive, non-public information was disclosed, and our initial finding is that not all of the data was from the blockchain”.

Since then, GTR has undertaken its own research into Kratos transactions during that period, and can reveal that trade data – including buyers, sellers, cargo type, and transaction-related numerical data – are all publicly visible without specialist knowledge or equipment.

 

Uncovering transactions

Like all blockchain-based applications or platforms, Kratos transactions are recorded on Ethereum’s distributed ledger. Once recorded, that information cannot be edited or removed – though typically platforms will encrypt any data attached to those transactions.

In Triterras’ case, the company initially planned to use its own digital token, KRATOS, though later abandoned that idea.

However, though the token was not used, it is possible to view KRATOS-related activity on publicly available blockchain explorer sites such as EtherScan.io.

That leads to a single Ethereum wallet address associated with tens of thousands of Triterras transactions that took place between June 2019 and November 2020.

Data included with those transactions can then be viewed in UTF-8 format – a widely used form of encryption – revealing the names of every buyer and seller, the type of cargo being traded, and information on transaction volumes and values.

For instance, an entry on July 1, 2019, shows that Rhodium Trading Australia registered three purchases of palm oil from Novita Trading Ltd (pictured).

Other visible data includes the Ether fee – a small charge that is part of the verification process for Ethereum transactions – the creator of the transaction, and the timestamp attached to the trade.

GTR was able to replicate a sample of transaction data disclosed in the short seller report, all of which covered trades between Novita and Rhodium in late June and early July 2019.

Those appear to be the first transactions recorded on the Triterras platform, and no other transactions took place during that period.

The same technique can be used to identify tens of thousands of transactions until late 2020.

 

Data ‘incomplete’

Though Koneru has consistently said the data uncovered by Phase 2 Partners was incomplete, the short seller report says it believes it captures around 99% of all Triterras transactions between June 2019 and August 2020.

Beyond the Novita-Rhodium trades that took place upon Triterras’ launch, there are no other specific transactions detailed in the short seller report, meaning further cross-checking of its full findings is not possible.

However, GTR was able to uncover transactions involving other entities named by Phase 2 Partners, including many commodities trades where Rhodium or Longview are involved. One of many examples found includes the sale of aluminium ingots from Quant Impex to Rhodium in July 2020 (pictured).

After August 2020, the data is less clear. By November 2020, the number of publicly viewable transactions had fallen significantly, and only four separate trading companies can be identified.

The short seller report suggests this could indicate a major drop in trade volumes on Triterras, but Koneru mentioned during the January investor event that security measures had been taken to prevent data disclosure “especially in the last few months”.

In the context of those security measures, Koneru added that the “trader counts claimed in the report were inaccurate” and do not cover the full count of active participants.

Triterras did not respond when asked what proportion of transactions or trading companies were missing from the short report, whether the claim of incompleteness refers to the period after those security measures had been put in place, nor what specific security measures had been taken.

During the investor event, Koneru also referred to “personal” information such as “the price of the product, and the commodity, the quantity” that was cited in the Phase 2 Partners report, and said that “not all of the data was from the blockchain”.

When asked by GTR the company did not say what specific data derives from sources other than Triterras blockchain records.

 

Triterras investigates

The company has responded to the short seller report, however, announcing in January the launch of an “independent investigation” that aims to “address and rebut” the allegations made.

The investigation will be overseen by its board of directors’ audit committee and undertaken by a law firm. Triterras did not say whether a law firm has yet been appointed, or when its review is likely to be published, when approached by GTR.

Triterras has also not said whether a new auditor has been appointed after the resignation of KPMG in January.

The company’s share price has recovered slightly since falling below US$7 in early March – from a high of over US$14 in December – boosted by this week’s announcement of a “strategic partnership” with Western Union Business Solutions.

The company said on March 9 that the partnership would support cross-border payments between traders and lenders using the Kratos platform.