Crypto lending firm, Maple Finance has severed ties with Orthogonal Trading due to its $36 million loan payment default. This happened after Orthogonal’s investment funds became tied up in the bankrupt crypto exchange, FTX.
The default on Maple’s key ecosystem players affects about 30% of the active loans on the protocol. Most of the defaults are in the M11 USDC pool, controlled by a separate company, M11 Credit. Orthogonal was due to pay back a $10 million USDC stablecoin loan from the M11 pool on December 4.
As a result, Maple Finance has severed ties with Orthogonal Trading. It is removing the firm as a borrower on the Maple Finance platform. Maple will also remove Orthogonal Credit as a delegate and shut down its lending pools.
According to a press release by Maple Finance,
“The decision to sever all ties with the firm was made as a result of Orthogonal Trading misrepresenting its financial position to M11 Credit over the last 4 weeks, and only on Saturday 3rd December communicating its inability to meet loan repayments.”
Maple stated it was crystal clear that Orthogonal has been operating while effectively insolvent. Hence, it will not be able to continue operations without outside investments.
The lending firm also stated that misrepresentations like this breached Maple’s agreement. As such, appropriate legal means to recover all funds will be followed. This includes arbitration and litigation if necessary.
Maple noted that the most immediate source of funds for recovery is from the Orthogonal Credit lending pool. This is specifically from the Pool Cover provided by Orthogonal at launch. The funds will also be gotten from any revenue generated by the pool till its closure. Maple hopes to recover at least $2.5 million.
Finally, Maple stated this would not affect Orthogonal Credit pool lenders. Loan payments will be made in the coming months with available cash used to facilitate withdrawal requests from the pool. Also, any fees generated will go towards recovery funds for lenders in the M11 pool.
