Pressure is mounting against Triterras over the performance of its blockchain-based trade finance platform Kratos, with the fintech firm denying allegations from short sellers that it understated the proportion of transactions carried out by companies linked to its directors.

Already facing legal challenges over the extent of its ties to Rhodium Resources, Singapore-based Triterras saw its share price plunge by around 25% on January 15 following the publication of a short seller report by hedge fund Phase 2 Partners.

Following analysis of transactions recorded publicly on the Ethereum blockchain, the fund alleges that nearly two-thirds of Kratos-based trades between June 2019 and August 2020 were carried out by companies controlled by Srinivas Koneru and Rick Maurer.

Koneru is chairman and chief executive of Triterras, as well as founder and director of Singapore-based commodities trader Rhodium.

Maurer is chief executive of Netfin, a special purpose vehicle that acquired Triterras in November. He is also founder, chairman and group CEO of Longview Resources.

Phase 2’s report alleges that Rhodium and Longview – along with multiple subsidiaries – were involved in 64% of Kratos transactions up to and including August.

The report also claims that in November and December 2020, following financial distress at Rhodium, the number of active participants on the platform had fallen from several dozen to just four.

Triterras issued a rebuttal late on January 18 describing Phase 2’s claims as “wrong”.

Its statement says Rhodium and Longview’s transactions make up a far smaller proportion of historical trading activity than the report claims, and that suggestions its trade volumes have suffered a “precipitous drop” are untrue.

“First, it is important to understand that the data set presented in the report – which we believe was not obtained solely from public data, but certain data points may have been the result of unauthorised access to the company’s data – is stale, and also contains numerous errors that we believe make it impossible to use to draw any reliable conclusions,” the statement says.

“And the conclusions that the report has drawn are wrong.”


Rhodium and Longview

Phase 2, a San Francisco-based fund recently launched by former Philadelphia Finance partner Justin Hughes, says its suspicions are rooted in analysis of transactions recorded on the Ethereum blockchain.

The company says it has used that analysis to produce data on who is using the Kratos platform, as well as the value and nature of the trades themselves.

Phase 2 says it believes the number of active participants on the Kratos platform is far lower than the 66 reported by Triterras – estimating a total of 39 different companies once subsidiaries are eliminated.

Of all transactions on the platform carried out between June 2019 and August 2020, its report says that 64% directly involved Rhodium or Longview. Between September and December 2019 the figure was 100%, it says.

When other potential professional or personal ties are taken into account, the report suggests that “at least 75% of transactions have connections to key company executives” at Triterras.

Comparing its findings to the fraud allegations against disgraced German payments firm Wirecard – also targeted by short sellers – Phase 2 says it has “both marketplace and related-party concerns” over Triterras.

Triterras made no secret of its plans to use its Rhodium connections in the months after launch, describing the relationship as providing a “necessary kickstart” in an investor presentation from July 2020.

Over time, new third parties would be added to the platform, which in turn would bring “the potential to add their multiple counterparties”, that presentation said.

However, the figures claimed by Phase 2 are drastically different to those disclosed by Triterras.

During an investor call on December 22, Triterras’ executive vice-president James Groh said that Rhodium and Longview contributed 24.9% of revenue from the platform between March and August. For the following three months, that total drops to 11.2%.

Though CEO Koneru said on the same call that expected revenues and transaction volumes from Rhodium would be “minimal over at least the medium term”, that was presented as a positive sign by Groh.

“This is really demonstrating the growth of revenues from independent third parties and our less reliance on related parties,” Groh said.

In its statement this week, Triterras says that as the administrator of the Kratos platform it does not “capture our clients’ proprietary product sources or terms of purchase and sale agreements [nor] analyse, dissect, or disseminate our customers’ information”.

“We can confirm however, that any conclusion that related parties will comprise 64% of fiscal 2020 volume either as a principal or a counterparty is wrong,” it says. “We believe it is less than half of that, which would be in line with our previous disclosures.”


Declining activity

Towards the end of 2020, it emerged that Rhodium was experiencing financial difficulties.

In a mid-December regulatory filing, Triterras disclosed that Rhodium had struggled to obtain access to trade finance as a result of the Covid-19 pandemic, and had been given a statutory demand for payment from one of its creditors.

Several law firms responded by initiating class action lawsuits on behalf of Triterras investors. Investor protection firm Bernstein Liebhard, for example, alleged that the company had failed to inform investors of the extent to which its revenue growth “was dependent on Triterras’ relationship with Rhodium”.

According to data presented in the Phase 2 report, there was a rapid decline in trading activity on the Kratos platform after August 2020. The number of trades involving Longview or Rhodium drops each month, and is given as zero for November and December.

The report claims that during those two months, only four companies were actively trading on Kratos. Of those four, the fund says it believes two are controlled by Arun Kumar and two by Siva Subramanian, who often appear to be “trading with themselves”.

“Arun often trades with Arun, and Siva often trades with Siva,” the report says. None of the four companies are listed as active prior to October, and the report does not suggest any tie to Rhodium or Longview.

Those claims are also vehemently denied by the Triterras statement, which says: “Simply put, the allegation that our volumes have demonstrated the precipitous drop alleged in the report is untrue.

“Our business remains on track and we also fully stand by our December 22, 2020 statements that, as of November 30, 2020 there were 66 traders on the platform and that our business remains strong.”

When contacted by GTR, Triterras did not provide its own data or confirm whether the number of participants actively trading on the Kratos platform increased, decreased or remained the same between August and December 2020.

A company representative added that they could not comment beyond the statement and disclosures to investors.