Orthogonal Trading operates one Maple pool and borrows from another.
Orthogonal Trading was “operating while effectively insolvent” and owed more than $30 million, so Maple Finance cut ties.
According to Maven 11 and Maple Finance, Orthogonal Trading misrepresented its financial position to Maven 11’s M11 credit pool for four weeks before announcing on Saturday that it could not repay loans.
Maple told Blockworks that recent financials were “misrepresented” and principal payments appeared solvent.
“Misrepresentation like this is in violation of Maple’s agreements and all appropriate legal avenues to recover funds will be pursued including arbitration or litigation,” Maple said Monday.
A spokesperson said Maple’s pool delegates manage borrower due diligence and investigate ways to verify assets.
Orthogonal Trading’s spokesperson didn’t respond.
Orthogonal Trading owes $31 million on four M11 Credit USDC loans. Maple says M11 Credit restructured and closed many loans early.
Orthogonal Credit, which operates separately from Orthogonal Trading, said in a blog post that it had no knowledge of the latter entity misrepresenting its exposure to FTX and its inability to repay a pool loan that matured on Sunday.
“Orthogonal Credit has no insight or influence over the trading business’s market making and trading activities,” the firm wrote. “Due to this development, the credit team is actively seeking strategic solutions to continue providing credit-as-a-service across self-custodial decentralized finance protocols.”
Maple pools capital for large borrowers. According to its website, Maple issued over $1.9 billion in loans in its first 10 months after being founded in May 2021. Deposits are around $125 million.
A spokesperson told Blockworks that the lending pools managed by different pool delegates are siloed to prevent one pool from affecting others.
In August, crypto investment firm Maven 11 announced its third Maple institutional lending pool, $40 million.
Orthogonal Credit’s “Orthogonal Trading — USDC01” pool does not contain loans to Orthogonal Trading.
Orthogonal Credit’s Monday blog post stated that Maple’s smart contract infrastructure protects USDC01 pool assets from Orthogonal Trading. The pool has three active loans to Portofino Technologies AG, a Swiss financial infrastructure technology company, Wintermute Trading Limited, a major market maker, and Reliz Ltd., a Maltese marketing agency.
Orthogonal Credit claims that all loans in the pool are active and not in distress. “Loan repayments will be made over the coming months with all available cash used to facilitate pool withdrawal requests.” Orthogonal Credit did not respond.
The crypto ecosystem is still reeling from FTX’s collapse.
Maple stated on Nov. 9—two days before FTX filed for bankruptcy—that borrower exposure to FTX and its native token, FTT, was limited.
A week later, Maple reported that while the past six months had “stress-tested” platform borrowers, many remained well-capitalized and able to withstand shocks.
At the time, Maple and delegates expected borrowers to service their loans.
Maple said pool delegates de-risked to avoid “second-order” effects of the FTX collapse. From 37 loans to 12 borrowers totaling $227 million the week before, 24 loans to 10 borrowers totaling $129 million were reduced.
Maple said this contagion was hard to avoid despite Maple’s risk mitigations.
This pool’s fees before its closure in the first quarter of 2023 will go to M11 Credit pool lenders.
Maple’s MPL token fell 24% in 24 hours as of 12:15 pm ET Monday.