Crypto Auditing Platform Sherlock, Expects $4M Maple Finance Bad Loans
Sherlock put $5 million USDC from its stake pool into Maple’s troubled credit pool, which took a $31 million hit when Orthogonal Trading went bankrupt because of FTX.
The smart contract auditing platform Sherlock said that Orthogonal Trading FTX-caused loan defaults on the crypto lending protocol Maple Finance would cause its stakers to lose $4 million. This is about a third of the capital in its staking pool.
Sherlock said that on August 31, it put about $5 million USDC of its $12 million staking pool into the credit pool on Maple that is managed by M11 Credit.
The bankruptcy of Orthogonal Trading caused $31 million of loans in the credit pool to go bad this week. 80% of the loans that are still being paid off are bad debt. But when Sherlock put money into the pool, Orthogonal’s loans made up only 14% of the pool’s loans.
In the post, Sherlock said that Orthogonal Trading’s disproportionate share of the loan book was “one of the main reasons why Sherlock’s losses are so big.”
When FTX went down in early November, Sherlock tried to take money out of the Maple credit pool, but he couldn’t because Maple had a 90-day lockup on new deposits.
After the lock-up ended at the end of November, Sherlock said it started taking the money back and was in the middle of the 10-day waiting period when Orthogonal Trading stopped paying on December 5.
The platform predicted that Sherlock bettors would be able to handle a $3.75 million to $4 million loss, since 20–25% of the money could be recouped.
“Unfortunately, Sherlock is not in a financial position to compensate stakers for this loss if Sherlock wants to continue operations otherwise,” the statement said.
The fact that Sherlock’s bettors lost money shows how far-reaching the collapse of crypto exchange giant FTX was. Orthogonal Trading was both a borrower and a manager of a credit pool on Maple. It lost money because some of its assets got stuck on FTX, and it didn’t pay back $36 million in debt. Maple also cut ties with Orthogonal because it lied for weeks about how bad its finances were.
