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Nexus Mutual loses 2461 ETH on defualt of Orthogonal Trading

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Written by

Edna Buckley
Published on

December 6, 2022

Key points:

  • Nexus Mutual announced that it expects to lose approximately 2,461 ETH (approximately $3 million) due to Orthogonal Trading defaulting on its loan.
  • Both projects borrow from the M11 Credit Wrapped Ethereum (WETH) credit pool built by Maple Finance.
  • Nexus voted to transfer 15,384 ETH to M11 Credit’s credit pool in August, with 99.09% support from the community.

Crypto insurance protocol Nexus Mutual is the latest company to be affected by last month’s FTX debacle.

The FTX dominoes continued to fall as Nexus Mutual revealed it had lost around $3 million in a series of related events due to the exchange's crash last month.

The crypto insurance protocol announced that it expects to “lose approximately 2,461 ETH” (approximately $3 million) due to Orthogonal Trading defaulting on its loan. Both projects borrow from the M11 Credit Wrapped Ethereum (WETH) credit pool built by Maple Finance.

Maple Finance is a lending platform that allows companies like M11 Credit to allocate funds and build their own lending facilities.

Orthogonal’s defaults are wide-ranging: most of its loans (approximately $31 million) are in M11 Credit’s USDC pool. The company is also owed an additional $5 million from M11’s WETH pool (the same pool that Nexus drew from). These funds were due to the trading firm's direct exposure to FTX.

Nexus first voted to transfer 15,384 ETH to M11 Credit’s credit pool in August, with 99.09% support from the community.

The insurance protocol has started a 10-day waiting period to withdraw these funds, but it still suffers some losses.

Nexus said the losses amounted to approximately 1.5% to 2.6% of project assets and would not affect day-to-day operations.

Nexus Mutual intercepts a stray bullet

While Maple Finance defaults are not uncommon, claims that Orthogonal Trading misrepresented its exposure to FTX are not.

Both Maple and M11 allege that the trading firm misrepresented its involvement in the collapsed cryptocurrency exchange, with Maple noting that “they were operating almost insolvent.”

On Tuesday morning, the company said it was "working closely with potential strategic investors" to help pay down debt. "Unfortunately, we were unable to coordinate the timing of the new financing with the repayment date of our $10 million loan," the note read.

Orthogonal Trading is not the only firm affected by the FTX contagion.

BlockFi, a popular crypto lending platform, Winklevoss-led exchange Gemini and prime brokerage Genesis are just some of the high-profile businesses that have filed for bankruptcy or collapsed due to the collapse of Sam Bankman-Fried’s crypto empire.


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