The decision to sever all ties with the firm was made as a result of Orthogonal Trading misrepresenting its financial position to M11 Credit over the last 4 weeks, and only on Saturday 3rd December communicating its inability to meet loan repayments. It is now clear that they have been operating while effectively insolvent, and it will not be possible for them to continue operating a trading business without outside investment. 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. 

In issuing a Notice of Termination to Orthogonal Credit as a Pool Delegate, Maple severs all ties and association with the firm. 

Maple will not work with bad actors or with firms that misrepresent their financials or business operations. We are shocked and disappointed in the behaviour of others and this is not a representation of how we do business. 

Maple is a technology and service provider. Maple is committed to providing on-chain lending infrastructure to improve capital markets, and will continue to provide this service. The scale and scope of the FTX insolvency has had an outsized impact to lenders in the space and whilst many risk mitigants are built into the Maple platform, the contagion in this instance was difficult to avoid. 

Impact and Action on Orthogonal Credit Lending Pool

The decision to cut the relationship with the Orthogonal Credit team is not taken lightly. The Orthogonal Credit team has operated independently from the Orthogonal Trading arm. Orthogonal Credit has grown a lending book to originate $850M with a 1.2% default rate in a volatile market. The Credit team has acted with integrity and professionalism and is seeking strategic solutions as an independent entity. Assets in the Orthogonal Credit pool continue to be protected by Maple’s smart contract infrastructure and separate to Orthogonal Trading. 

We do not anticipate any impact to lenders in the Orthogonal Credit pool because all loans remain active with no current signs of distress. Loan repayments will be made over the coming months with all available cash being used to facilitate withdrawal requests from the pool.  Any fees generated in this pool ahead of its expected closure in Q1 23 will go towards recovering funds for Lenders in the M11 Credit pool. 

Impact and Action on M11 Credit USDC Lending Pool

Orthogonal Trading's current liabilities are $31M across 4 loans in the M11 Credit USDC pool. M11 Credit has restructured the loan book and prudently closed many loans early. At 1st September exposure to Orthogonal Trading was 14% and within the limits of M11 Credits risk framework, now the majority of loans are to Orthogonal Trading. M11 Credit has issued a letter of default to Orthogonal Trading for all active loans and all avenues to recover funds will be pursued. 

The most immediate source of funds for recovery is from the Orthogonal Credit lending pool, specifically the Pool Cover provided by Orthogonal at launch, and any revenue generated by the pool from now until its closure.  These funds will be held by Maple’s smart contracts and applied equitably to lenders in M11 Credit pool in due course.