Orthogonal Trading Claims Insolvency
In today's edition of YIYL (You Invest, You Lose) we get first-hand experience at how loyal a hungry dog is, when the bull market is raging it seems like everyone is the best of friends, you know GM, WAGMI but when the bear market comes around you see how these shitcoiners start to eat one another and go, full Lord of the flies, as they try to save their own arses.
As the river of liquidity runs dry it becomes harder for those on leverage to service their loans as profits from traders do not flow as freely as they used to and finding opportunities that have enough of a spread to deploy becomes really hard.
One of those firms finding it out the hard way seems to be Orthoganl trading a fund that plays around in the crypto space and has defaulted on eight loans totaling $36 million on lending protocol Maple Finance.
No pay no play
Orthogonal was due to pay back a $10 million USDC stablecoin loan from a credit pool managed by M11 Credit on Dec. 4. Orthogonal has been a significant borrower on Maple, and also was a manager and underwriter of a credit pool on Maple.
M11 Credit has issued a notice of default to Orthogonal for all active loans outstanding on Maple's USDC stablecoin pool, with $31 million of current liabilities in four loans.
The default notice also extends to Orthogonal's wrapped ether (wETH) loans worth of $5 million (3,900 wETH) from another M11 Credit-managed lending facility on Maple.
The unsecured lending platform Maple Finance published a blog post saying they were done with Orthogonal Trading, which had "misrepresented its financial position" for a month.
"It is now clear that they have been operating while effectively insolvent, and it will not be possible for them to continue operating a trading business without outside investment," wrote Maple.
Coming out with the truth
On December 3, Orthogonal Trading admitted to Maple that they were unable to meet loan repayments. And damage control begin with Orthogonal Credit, a sister group to Orthogonal Trading, published a blog post distancing themselves, writing that they were
"shocked and dismayed" by Trading's misrepresentation. "We are speechless by the extent of the exposure and liquidity position of Orthogonal Trading’s book of business,"
They wrote. They attributed the insolvency to FTX exposure, which seems to be the coward's way out, sure blame FTX because it's easy to make SBF the villain when you couldn't do proper risk management.
Big time exposure
Orthogonal's $31 million in outstanding loans from the M11 Credit USDC lending pool represents around 80% of the $38.5 million active loans in the pool.
While the 3,900 ETH loans take up some 18% of the pool's $28 million of outstanding debt. That sure is a sizable chunk of your liquidity that doesn't look like it will be returning to the pot.
Funds are SAFU?
🤣
How many times have we heard that only for it to turn out not to be true, am I right ladies and gents? Well, we're about to hear it again, despite the hole in their treasury now, the founder of said "decentralised lender" FOUNDER, claims funds are SAFU.
According to Maple Finance, Founder Sid Powell highlighted that the protocol locks the funds for each pool in separate smart contracts, meaning that they’re not co-mingled. As a result, the losses were limited to each affected pool
He also acknowledged that there needs to be more stringent due diligence when it comes to undercollateralized lending and said the platform may look to introduce partially collateralized loans.
Uncollateralized loans make zero sense in the digital asset market, the amount of risk you're taking is crazy and just shows how credit driven the shitcoin market is and good riddance to bad products.
If you want to fuck around with leverage, by all means, get rekt.
Sources:
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Have your say
What do you good people of HIVE think?
So have at it my Jessies! If you don't have something to comment, "I am a Jessie."
Let's connect
If you liked this post, sprinkle it with an upvote or esteem and if you don't already, consider following me @chekohler and subscribe to my fanbase
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