The move came after M11 Credit, a Maple Finance Pool Delegate, issued Orthogonal Trading a default notice yesterday claiming that the company had failed to pay back a due of a $10 million USDC stablecoin loan.
According to a blog post by M11 Credit, Orthogonal Trading informed the company on 3rd Dec. that they had incurred much larger losses than earlier disclosed due to funds held on FTX and, as a result, won’t be able to repay the loans.
M11 Credit believes the company “purposefully misstated their exposure,” committing 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,” wrote M11. “We are extremely shocked and disappointed by the actions of Orthogonal Trading.”
Orthogonal Trading, which operated separately in the roles of Pool Delegate and Borrower on Maple Finance, had total liabilities of $31 million across four loans in the M11 Credit USDC pool.
“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,” stated Maple Finance.
The lapse marks another case of growing loan defaults on uncollateralized lending platforms. In June, Bable Finance failed to service its debt on Maple. Similarly, South Korea’s Blockwater Technologies and Invictus Capital defaulted on a $3 million and $1 million loan on lending protocol TrueFi.
Orthogonal also joins the long list of firms affected due to exposure to Sam Bankman-Fried’ FTX.