M11 Credit wETH pool: updates and status reports

Since M11 Credit and Maple announced that Auros was suffering from liquidity issues and Orthogonal Trading had allegedly misrepresented their financials, members have discussed how the mutual should proceed with the capital pool assets invested in M11 Credit’s wETH lending pool.

Members have signaled support to withdraw from the wETH pool and delegate the withdrawal process to DAO investment team, per the Snapshot signaling vote results.

Since the situation remains fluid and M11 Credit has been issuing periodic updates, I will collect any updates pertaining to the wETH pool in this thread and provide members with regular updates, as they become available. This thread will also serve as a forum for the DAO investment team to provide status updates, as necessary when new information becomes available.

Past Forum Discussions

Past Updates from M11 Credit, Maple Finance

Below, you can find the updates provided by both M11 and Maple to date.

M11 Credit Updates

  1. Auros update (30 November 2022)
  2. Auros update (1 December 2022)
  3. Auros update (5 December 2022)
  4. Orthogonal Trading update (5 December 2022)
  5. Auros update (11 December 2022)
  6. Orthogonal Trading update (14 December 2022)
  7. Auros update (20 December 2022)
  8. Orthogonal Trading update (22 December 2022)

Maple Finance Updates

  1. Update related to Orthogonal Trading (5 December 2022)
  2. Update related to Maple v2 transition and withdrawals (8 December 2022)
  3. Updated related to Auros (21 December 2022)

Next Update

The DAO investment team will post the next update and provide members with a status update on the funds deposited in the M11 Credit wETH pool on Maple Finance.

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23 December 2022 | M11 Credit has airdropped MPL to lenders in their wETH lending pool today. Nexus Mutual received 14,571.94 MPL (valued @ $46,630.21 at the time of writing).

See the following update from M11 Credit for more information: https://twitter.com/M11Credit/status/1606314452797648898

DAO Investment Team Update from @Dopeee | Status as of 23 December 2022

With all of the information we currently have, our understanding is that withdrawing funds from the pool will incur a very significant penalty of 51.56%. However, the projected realized recovery is far in excess of this figure, given the current information and plan. Considering this, we believe that the most profitable path from here is to remain in the pool and continue with a workout plan.

Ideally, this plan will include short-term payments of a significant percentage of our exposure. This would likely require some loans to be rolled and potentially a small amount of credit exposure is exchanged for equity.

There is still no precise plan agreed with liquidators on how this workout plan will unfold. We have enough confidence in the current assets of borrowers that even with a poorly designed workout, we will be able to recover more capital if we remain in the pool than withdrawing from the pool given the current impairment. This assumes that there is no significant default on other outstanding loans, particularly to Flow Traders. It’s quite hard to quantify this risk, given that the same M11 Credit assessment for Flow Traders led to defaults on Auros and Orthogonal Trading loans. Having said that, the most recent financials suggest that Flow Traders are still in a strong position. With heavy non-crypto market exposure, they were not and are not in the same position as other borrowers with regards to the contagion’s impact on their corporate financial health.

Overall, it seems that the best path from here is to continue toward a workout plan with the goal of near full recovery. This comes at the expense of time and demands further exposure to the types of loans that have defaulted so far. Because Auros’ loans have been impaired to zero, although the expected recovery is very high, removing funds now would require taking a hit far beyond the true value of our deposit in the pool. Even with a decent cushion for defaults on other loans, a workout with heavy short-term repayments seems to be the best path forward.

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This thread will be used to provide updates and status reports, which will be posted by the DAO investment team.

Should you have comments on this process, please use the Update on Nexus Mutual’s Exposure to M11 Credit’s wETH Lending Pool on Maple Finance topic to post comments and questions, so this thread can be used soley for updates.

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