Sherlock Forecasts a $4M Loss From Maple Finance

Sherlock Forecasts a $4M Loss From Maple Finance
  • Sherlock anticipates a $4M loss for its stakers, from the troubled loans on Maple Finance.
  • Sherlock previously deposited $5 million in USDC of its staking pool onto the credit pool of Maple.

Sherlock, a crypto auditing platform, anticipates a massive loss from the troubled loans on the blockchain-based institutional capital marketplace, Maple Finance. In a recent blog post, Sherlock predicted a $4 million loss for its stakers, or roughly one-third of the capital in its staking pool, due to Orthogonal Trading FTX-induced loan defaults on Maple Finance.

The platform stated that, in August, it had deposited $5 million USDC of its $12 million staking pool to the credit pool on Maple, managed by M11 Credit. 

Will Stakers Witness a Massive Loss?

Due to Orthogonal Trading’s insolvency, this week saw the default of $31 million in credit pool loans. 80% of the credit pool’s outstanding loans are made up of bad debt. However, when Sherlock invested in the pool, Orthogonal’s borrowings accounted for only 14% of the pool’s loans. 

Sherlock also mentioned Orthogonal Trading’s disproportionate weight in the loan book as “one of the main reasons why the losses at Sherlock are so large.”

According to Sherlock, when FTX crashed in November, the platform attempted to withdraw funds from the Maple credit pool, but was unable to do so since the 90-day lockup period for fresh deposits was still in effect. Additionally, when the lock-up ended, the firm started withdrawing the fund. By the time Orthogonal Trading went into default on December 5, it was in the middle of the 10-day waiting period before reclaiming assets, Sherlock stated. 

However, the platform estimated that Sherlock investors would have to take a $3.75–$4 million loss because 20–25% of the fund might be recoverable.

Sherlock added: 

Unfortunately, Sherlock is not in a financial position to compensate stakers for this loss if Sherlock wants to continue operations otherwise.

Due to the digital assets stuck on FTX, Orthogonal Trading, a borrower and credit pool manager on Maple, experienced losses and went into default on a $36 million obligation. In addition, Maple discontinued its connections with Orthogonal after it misrepresented its financial difficulties for several weeks.

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