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Maple Finance Cuts Ties With Orthogonal Trading Over $31M Loan
Decentralized finance (DeFi) company Maple Finance announced Monday that it had cut its ties with the crypto trading firm Orthogonal Trading. The move was made due to a default on a $31 million loan and “a breach of the Master Loan Agreement.” Maple & M11 Credit Severs Ties With Orthogonal Trading Maple Finance is a ... Read more
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Nwani Mishael
Decentralized finance (DeFi) company Maple Finance announced Monday that it had cut its ties with the crypto trading firm Orthogonal Trading. The move was made due to a default on a $31 million loan and “a breach of the Master Loan Agreement.”
Maple & M11 Credit Severs Ties With Orthogonal Trading
Maple Finance is a platform where institutional investors can secure undercollateralized loans. Orthogonal Trading secured a loan from M11 Credit, a project that manages three liquidity pools on Maple.
According to an official statement released by Maple, the $31 million loan secured by Orthogonal Trading came from four loans in the M11 Credit USDC liquidity pool.
Before December 3rd, the crypto trading firm had hidden the actual state of its solvency from Maple and M11 Credit. However, on December 3rd, Orthogonal Trading revealed to its creditor that it had become insolvent. The firm cited its “much larger” exposure to the collapsed crypto derivative exchange FTX.
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
Instead of disclosing its insolvent state, Orthogonal Trading opted to conduct further trading activities. It likely carried out this action to regain its financial stability. But it ultimately failed, as it could not repay its loan to M11 Credit.
By failing to inform the liquidity management firm of its financial problems, Orthogonal Trading breached an agreement with M11 Credit. The agreement mandated the trading firm to fully disclose its financial condition to its creditor, M11 Credit. The liquidity manager has also disclosed its plans to recover funds from its debtor.
“We are committed to always upholding the terms of the Master Loan Agreement and protecting the interests of the liquidity providers. Next to this, we are weighing all options for legal recourse and M11 Credit will allocate its full Pool Cover towards recovering funds,” the statement added.
Ripple Effect of FTX Collapse
As mentioned earlier, Orthogonal Trading’s insolvent state is heavily attributed to the debacle of FTX.
The collapse of FTX has affected the entire crypto market. Several companies have also been severely affected by the collapse of the derivatives exchange. These firms include BlockFi, Gemini, Genesis Digital, and others.