Orthogonal Credit, a delegate firm that managed lending pools for Maple Finance, made an early decision not to lend to the sister company of FTX Exchange, Alameda Research.
The Maple lending protocol offers loans to parties without providing any initial collateral. To ensure that the borrowers are in a position to repay the loans, pool delegates oversee the management of the loans by evaluating the creditworthiness of each borrower using off-chain criteria.
Without delving into specifics, Orthogonal said on Twitter today that after exercising due diligence in risk management, it discovered some “weaknesses” in Alameda before the recent issue.
We value transparency and accountability, particularly so during uncertain times. We’d like to confirm that we have no Alameda exposure and have not underwritten a loan to Alameda since Feb ’22 in the Orthogonal USDC01 Pool. (1/x) @maplefinance
— Orthogonal Credit (@OrthoCredit) November 9, 2022
According to the company, these vulnerabilities are related to Alameda’s organizational structure, business procedures, and the quality of the assets it reported as holding on its balance sheet. These elements compelled them to cut their loan relations to Alameda.
Orthogonal stated in the tweet post:
We considered these key weaknesses and made a commercial decision to sever our institutional lending relationship. Not a decision we took lightly but a necessary part of proactive risk management.
Prior to this, the lending company had provided $288 million in loans, of which a particular pool was devoted to Alameda and ran from November 2021 to May 2022. The company last underwrote an Alameda loan in February 2022 in a different pool called USDC01.
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Alameda Research is not now the subject of any loans from Maple Finance, according to M11, another representative. Despite not having any outstanding loans with Alameda, Orthogonal and M11 both claimed to have a small amount of exposure to FTX through counterparties.
2/ We are pleased to see the majority of our counterparties actually front-ran and took swift action over the weekend and cut exposure by proactively withdrawing assets from FTX.
— M11 Credit (@M11Credit) November 8, 2022
M11 Credit said:
After reconciling and validating information on exposure to FTX and FTT from borrowers across our pools on @maplefinance we want to share the following insights. In summary: No loans to Alameda, limited FTX exposure and robust overall health of the loan book.
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