The creditors of some are the debtors of others – Beyond the users directly impacted by the bankruptcy of the platform FTXthey are different decentralized finance protocols (DeFi) which are also affected by the freezing of funds and the fall of the exchange. Despite the justice initiatives to recover a maximum of funds from the subsidiaries of the company of Sam Bankman-Fried, the money will run out to repay all creditors of the company. Today it’s Maple Financethe DeFi protocol specializing in crypto credits for businesses, who suffers the consequences. Explanations.
Collateral loan and questioned pool delegates
The society Maple Finance is an intermediary between hedge fund managers – called pool delegates – and corporate borrowers. Maple Finance provides the blockchain infrastructure and lets the delegates manage their affairs, although the company has agreed a number of principles with them beforehand. Sidney Powellthe CEO of the platform, compares his service to that of Shopify insofar as it gives businesses the tools to run an online lending business themselves.
And among the different delegates, the one that interests us today offers different loan pools on Maple Finance and is called M11. It is a subsidiary of the investment company Maven 11 Capital. Its teams have just issued a default notice to one of these debtors named Orthogonal Trading. The latter owes him 36 millions the dollars spread across four loans with different denominations, in USDC and wrapped ether (wETH).
>> For your crypto purchases, register on the eToro platform (commercial link) <<
Orthogonal Trading, M11 and Maple Finance: the Russian dolls of DeFi
It would seem thatOrthogonal Trading lied for several weeks about his financial situation before finally admitting, on December 3, to being in theinability to repay its various loans following his exposure on FTX. This attitude is not acceptable to M11 nor for Maple Financewho made the following statement:
“It is now clear that Orthogonal Trading continued to operate, when it was effectively insolvent. And it will not be possible for it to continue (…) without outside investment. Misrepresentation such as this is in violation of Maple’s agreements and all appropriate legal avenues to recover funds will be pursued. »
Orthogonal Trading was also the manager of its own loan pools on Maple Finance, which has just put an end to its delegate prerogatives. At the same time, M11 insisted on communicating to its own creditors thestate of his finances and sound exposure to Orthogonal Trading, while the Orthogonal Credit team dissociates itself from the actions of its sister company Orthogonal Trading. It’s not easy to understand the ins and outs of all these financial arrangements in DeFi XXL!
It’s not not the first time that we are witnessing complex financial arrangements in decentralized finance, which are deceptively similar to what is done in traditional finance. We lend each other money that we have borrowed elsewhere, which will then be deposited as collateral against other funds. And if one link in the chain is missing, the whole edifice collapses… And justice finds itself having to sell a yacht in an attempt to repay creditorssurprised to learn what their money had been used for.
The events of the past weeks and the bankruptcy of FTX are there to remind us that we must remain cautious in this still very young ecosystem. Get into the habit of healthy distrust. To buy your cryptocurrencies, register now on eToro and start getting acquainted with the exciting world of blockchain technology (commercial link).
