Maple Finance, a DeFi lending platform, announced on Monday, December 5, that it has cut ties with cryptocurrency trading platform Orthogonal Trading citing that it was “misrepresenting its financial position.”
The announcement comes after Orthogonal Trading was due to pay back a $10M USDC stablecoin loan from a credit pool managed by M11 Credit on December 4.
M11 Credit issued a notice of default to Orthogonal for all active loans outstanding from that particular USDC stablecoin pool on Maple, with $31M liabilities in four loans. The crypto company also has another $5M in liabilities in the M11 Wrapped Ethereum pool.
M11 Credit uses Maple Finance’s services to issue loans to interested parties.
“On Saturday, December 3, 2022, Orthogonal Trading informed us that due to funds held on FTX, they incurred much larger losses than previously disclosed and that these losses had resulted in their inability to repay loans and uphold their obligations as a borrower,” says Maple Finance.
Maple Finance says that Orthogonal Trading purposefully misstated its exposure and has therefore committed a serious breach of the Master Loan Agreement (MLA).
“Rather than cooperating with us and disclosing their exposure, they attempted to recover losses through further trading, ultimately losing significant capital,” says the company.
According to Maple Finance, exposure to Orthogonal Trading was 14% as of September 1 and is within the limits of the M11 Credits risk framework.
Maple Finance intends to recover the funds from the Orthogonal Credit lending pool, particularly the Pool Cover provided by Orthogonal at launch, and any revenue generated by the pool from now until its closure.
In due course, these funds will be held by Maple’s smart contracts and applied equitably to lenders in the M11 Credit pool.
“Orthogonal’s default showcases how uncollateralized loans in [decentralised finance] are still reliant on centralised parties for underwriting, antithetical to the ethos of transparency and decentralisation,” Walter Teng, vice president of digital assets at market research firm Fundstrat, told CoinDesk.
Maven 11: What you need to know
Founded by a diverse set of serial entrepreneurs, investors, and blockchain builders in 2015, Maven 11 is an Amsterdam-founded blockchain and crypto-asset investment firm that invests in and supports its ventures globally.
Last year, the company raised its second fund, Venture Fund II, at $120M (approx €106.35M) from high-net-worth individuals with a background in finance and technology, crypto entrepreneurs, family offices, and institutional backers.
Maple Finance: What you need to know
Maple` is an institutional capital market powered by blockchain tech. The platform provides the infrastructure for credit experts to efficiently manage and scale crypto lending businesses and connect capital from institutional and individual lenders to innovative, blue-chip companies.
Since its launch in May 2021, the Maple platform has originated 170 loans with a total value of $1.5B (approximately €1.4B).
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