After allegedly misrepresenting its finances, DeFi-based lending platform Maple Finance cut ties with crypto firm Orthogonal Trading

Maple Finance, the DeFi-based lending platform, has cut ties with Orthogonal Trading, a crypto firm after it allegedly misrepresented its financial position. On the 4th of December, M11 Credit, a Maple Finance pool delegate, issued a default notice to Orthogonal Trading, asserting that the crypto firm has $31 million in due liabilities in the USDC pool of M11 and is unable to repay those debts.

According to the notice, the crypto firm also has another $5 million in liabilities in the M11 Wrapped Ethereum pool. M11 Credit uses the services of Maple Finance to release loans to interested parties. However, Maple isn’t involved in the lending process, but it has provided technical services. In an interview with Decrypt, Sidney Powell, the CEO of Maple, compared the service to Shopify, but for lending, it gave tooling to run a lending business online.

And now, Sidney explained that the lending business is very delegated. While Orthogonal Trading is borrowing from M11, a firm that has created a lending business using Maple Finance. However, in this case, Maple has stepped in due to what it suspects to be a misrepresentation of the financial status of Orthogonal Trading.

In the 5th of November note, Maple wrote that It is now clear that Orthogonal Trading has been operating while effectively insolvent, and it will not be achievable for them to keep up operating a trading business without outside investment. Misrepresentation like this is in violation of agreements of Maples, and all appropriate legal avenues to recover funds will be pursued, including litigation or arbitration as necessary, the note reads.

These days, when several crypto firms have been struggling due to the bear crypto market and the collapse of FTX, which was once the biggest crypto exchange in the world and now is nothing, missing payments or defaulting outright is not uncommon. And in this case, both M11 and Maple alleged that Orthogonal misrepresented the extent of its liabilities. According to M11, Orthogonal Trading informed M11 and Maple that its losses were much larger than earlier disclosed. 

In a blog post, M11 stated that we believe that Orthogonal Trading previously purposefully misstated its exposure and has therefore committed a serious violation of the Master Loan Agreement. Rather than cooperating with us and disclosing their exposure, the trading firm attempted to recover losses through further trading, ultimately losing significant capital, M11 added.

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