Orthogonal Trading has defaulted on eight loans totaling $36 million in the Maple Finance crypto-lending protocol, due to losses tied to the FTX collapse.
Orthogonal Trading misrepresented its financial position to M11 Credit, and we sever all ties with the firm.
As a technology provider, not a lender, the Maple protocol is open and working in the best interest of all stakeholders.https://t.co/qKSFKDFhQ1
— Maple (@maplefinance) December 5, 2022
The repudiation of obligations by one of the protocol’s key ecosystem participants affected roughly 30% of active loans on the platform.
Maple, in response, severed ties with Orthogonal Trading, the parent company that runs its trading and lending units. As a result, the former loses the ability to borrow on the platform, and the latter to continue operating as a loan delegate.
“Orthogonal Trading misrepresented its financial position over the past four weeks and only on Saturday, December 3, disclosed its inability to repay the loan. It is now clear that they were operating while effectively insolvent and will not be able to continue trading without external investment,” Maple said.
Ending the relationship with Orthogonal Credit was not easy for the protocol team. The unit had operated independently and built a loan portfolio of $850 million with a 1.2% default rate.
“The Credit team acted in good faith and professionally. It is pursuing strategic solutions to continue operating as an independent organization. Assets in the loan pool are protected by the platform’s smart-contract infrastructure and are segregated from trading,” Maple said.
Most of Orthogonal Trading’s liabilities—about $31 million—pertain to the M11 USDC pool managed by M11 Credit. The remaining $5 million are in the Maven M11 WETH pool, Maple told The Block. The platform provides the infrastructure and technology for lending.
In M11 Credit, a subsidiary of Maven 11, it was noted that Orthogonal Trading denied any material impact of the FTX collapse on the business. Only on December 3 did the firm admit losses that led to an inability to service loans.
On December 3rd, Orthogonal Trading informed us that due to funds held on FTX, they incurred a much larger loss than previously disclosed to us, and will not be able to repay loans or uphold their obligations as a borrower. https://t.co/VI6MfsNpOb
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— M11 Credit (@M11Credit) December 5, 2022
“As we understand it, Orthogonal Trading misrepresented risk information, and consequently the M11 Credit team should have taken immediate action,” said the Orthogonal Credit team.
She emphasised that it operated independently of the trading division and had at one time rejected profitable lending relationships with Alameda.
— Orthogonal Credit (@OrthoCredit) December 5, 2022
Binance CEO Changpeng Zhao predicted that the FTX collapse would lead to a ‘cascading effect’ in the crypto industry.
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