Orthogonal Trading Liquidated After Defaulting on $36M Loan

• Orthogonal Trading, a digital asset trading firm, has been placed under provisional liquidation by the British Virgin Islands courts after defaulting on $36 million of loans from M11 Credit-managed lending pools on decentralized finance protocol Maple Finance.
• M11 Credit and Maple had sought an “urgent ex parte application” to appoint a provisional liquidator for Orthogonal Trading in British Virgin Islands High Court, which was granted.
• Officials with the firm’s own lending unit, Orthogonal Credit, claimed they were kept out of the loop on the depth of Orthogonal Trading’s financial troubles.

The digital asset trading firm Orthogonal Trading has been placed under provisional liquidation by the British Virgin Islands courts, after defaulting on $36 million of loans from M11 Credit-managed lending pools on decentralized finance protocol Maple Finance. The news, tweeted Thursday by M11, came after Orthogonal Trading failed to meet a $10 million payment due earlier this month.

M11 Credit and Maple had sought an “urgent ex parte application” to appoint a provisional liquidator for Orthogonal Trading in British Virgin Islands High Court, which was granted. Orthogonal Trading had been a borrower and a lending pool manager on Maple, and had misrepresented its losses in the FTX collapse and operated while insolvent for weeks. Depositors in impacted lending pools are facing up to 80% losses.

Officials with the firm’s own lending unit, Orthogonal Credit, put forth their own Medium post claiming they were kept out of the loop on the depth of Orthogonal Trading’s financial troubles. The post stated that the borrower had made a “series of misrepresentations” to them and other lenders, and that the unit had been “unable to get any answers” about what had happened to their money.

M11 Credit has said that the firm was seeking fresh funding to cover all outstanding liabilities and had made good progress, but the money didn’t come through in time to meet the payment due. Maple has since booted Orthogonal Trading from the platform.

The insolvency of Orthogonal Trading highlights the risks associated with cryptocurrency lending without collateral. The lack of regulation makes it difficult to protect lenders from instances of default, and the risks may be magnified when dealing with unregulated firms. It is yet to be seen what the outcome of the insolvency proceedings will be, but it is clear that the incident is a cautionary tale for lenders.

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