Update on Nexus Mutual’s Exposure to M11 Credit’s wETH Lending Pool on Maple Finance
We were notified by M11 Credit and Maple Finance of issues with specific loans in the M11 Credit wETH lending pool. Nexus Mutual took swift action to initiate the 10-day waiting period to withdraw all available funds from the M11 Credit pool on Maple, following a default by Orthogonal Trading and allegations that they misrepresented their financial position to M11 Credit.
This development does not impact Nexus Mutual’s day-to-day operations or the ability to pay claims. Expected losses represent an estimated 1.5% — 2.6% of the mutual’s assets.
Updates on Auros and Orthogonal Trading
We were made aware of Auros’ short-term liquidity issues that impacted their ability to make repayments. M11 Credit reviewed Auros’ latest financial statements and their path to recovery and provided Auros with a short-term extension. We are expecting a high recovery on the wETH loans made to Auros.
At that time, we were informed that Orthogonal Trading was in a healthy position and was expected to make full repayments on their loans. Despite this, they are now expected to default on all outstanding loan obligations.
Maple Finance provided an update on the Orthogonal Trading situation this morning:
As a result of material misrepresentations regarding their financial position, Maple has severed all ties with the parent entity Orthogonal Trading.
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 as necessary.
M11 Credit also provided an update on Orthogonal Trading:
M11 Credit immediately issued a Notice of Default for all active loans. All appropriate legal avenues to recover funds for the benefit of the liquidity providers will be pursued including arbitration or litigation as necessary.
…we are weighing all options for legal recourse and M11 Credit will allocate its full Pool Cover towards recovering funds. As referred to in the statement issued by Maple Finance, fees and pool cover being derived from Orthogonal Credit pool will be also allocated towards further recovery for the benefit of the liquidity providers.
Based on what we know currently, Nexus Mutual should expect to take a loss of around 2,461 ETH on the Orthogonal Trading loans. This represents 1.6% of our assets. The Auros situation is more fluid, but losses are expected to be less than to Orthogonal Trading.
Swift action was taken to start the withdrawal process for these funds. There is a 10-day waiting period before any capital can be withdrawn. This decision was made to maximize recovery for Nexus Mutual.
Background on the capital allocation to M11 Credit wETH lending pool
Proposed on the community forum, members had a discussion about allocating capital to M11 Credit’s wETH lending pool on Maple Finance. Following this review period, community members voted 99.09% in favor of Proposal 172. After this proposal was approved and the governance cool-down period elapsed, 15,348 ETH was deposited into the wETH lending pool, managed via an Enzyme vault.
For further information on Auros and Orthogonal Trading, see the updates below.
Auros
Orthogonal Trading
