The crypto insurance protocol Nexus Mutual revealed a $3 million in Ethereum exposure to the default of Orthogonal Trading
The collapse of FTX, which was once the biggest crypto exchange in the world and now is nothing, affected several crypto firms, as some firm stopped their withdrawals, some tried to raise a loan to solve their liquidity crunch due to this collapse, some reached on the verge of bankruptcy, and all the cryptocurrencies prices dropped to new lows. These effects have not yet ended, as the crypto insurance protocol, Nexus Mutual, revealed $3 million in losses due to the exchange’s collapse last month.
On the 5th of December, in a blog post, Nexus Mutual announced that it expects to take a loss of around 2,461, worth around $3 million, due to Orthogonal Trading defaulting on its loans. Both of these two projects were borrowing from M11 Credit’s Wrapped Ethereum lending pool, which was built on Maple Finance.
Maple Finance, a lending platform, allows firms like M11 Credit to allocate capital and spin up their lending facility. The default of Orthogonal Trading was extensive, and the majority of its loans, around $31 million worth, were in M11 Credit’s USDC pool. Orthogonal also defaulted on another $5 million in the WETH pool of M11. And all these funds were due to its direct exposure to the FTX exchange.
In August, Nexus first voted to move 15,384 Ethereum into the lending pool of M11 Credit and gained 99.09% approval from the community. Moreover, Nexus has already initiated a ten-day waiting period to withdraw these funds, but it will still suffer some losses. According to the insurance protocol, the loss amount is around 1.5% to 2.6% of the project’s assets, which will not affect its daily operations.
The defaults on Maple Finance are not entirely uncommon, but allegations that Orthogonal Trading misrepresented its exposure to the FTX exchange are unusual. Both Maple Finance and M11 Credit alleged that Orthogonal misstated its exposure to the collapsed crypto exchange. And Maple claimed that the trading firm has been operating while effectively insolvent.