Maple Finance, a big blockchain-based lending platform, severed ties with crypto firm Orthogonal Trading, alleging that it was "misrepresenting its financial position."
The move came after Orthogonal was due to pay back a $10 million USDC stablecoin loan from a credit pool managed by M11 Credit on Dec. 4. Orthogonal has been a significant borrower on Maple, and also was a manager and underwriter of a credit pool on Maple.
Maple said in a statement that Orthogonal has been "operating while effectively insolvent," and didn't communicate that it would be unable to service the debt.
"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," according to the statement.
A default by Orthogonal could deal another blow to crypto lending and unsecured credit protocols, still grappling with the fallout of crypto exchange FTX's implosion.
An email from CoinDesk requesting comment from Orthogonal wasn't immediately returned.
M11 Credit wrote Monday in a blog post that it was informed by Orthogonal on Dec. 3 that it "incurred larger losses than previously disclosed" due to funds held on FTX, the crypto exchange which imploded last month, and as a result was unable to repay its debt as a borrower.
"We are extremely shocked and disappointed by the actions of Orthogonal Trading," M11 Credit's statement said. "Purposefully misstating information during the numerous contacts we have had over the last weeks severely impacted our ability to manage our outstanding credit risk."
UPDATE (Dec. 5, 15:50 UTC): Added paragraphs about M11 Credit's statement and Orthogonal's outstanding loans from M11 Credit.
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