M11 Credit wETH pool: updates and status reports

Investment
5

All of our remaining wETH has now been withdrawn from the M11 wETH pool on Maple.

There is now 13,218 wETH, worth around $21.6m, in the Enzyme vault.

SUMMARY

  1. ETH was deposited to Enzyme, converted to wETH and deposited into the pool.

  2. Following the FTX debacle, Orthogonal Trading and Auros missed repayments due to liquidity issues.

  3. The investment hub was given the power by a member vote to act on behalf of the mutual to pursue the best recovery possible. In practice, this looked like hundreds of hours of calls and negotiations to look at every possible avenue for getting to a full recovery.

  4. Auros filed for voluntary bankruptcy and following a court proceeding, was able to raise additional funds to continue operation.

  5. Auros repaid all existing Maple loans, and was issued new loans.

  6. Due to excess funds in the protocol, from loan repayments from Flow Traders, and the lack of withdrawals from other parties, we were able to get 100% of our remaining funds out from Maple. This was not our expected outcome, so we’re quite pleased with the resolution. We expected to be forced to roll nearly half of our funds into future loans for Auros, which was the resolution mandated by the court following negotiations with counterparties like M11.

  7. But because other parties did not withdraw in time, and the excess funds which M11 decided to retain for withdrawals rather than reissuing, we were able to fully exit. The remaining funds in the M11 pool, which Nexus Mutual is no longer part of, will use the remaining capital to issue the required loans for Auros.

  8. Orthogonal Trading is still defaulted.

  9. Any future assets returned by Orthogonal Trading to Maple will be airdropped proportionally to the parties impacted, us included, despite not remaining in the pool.

  10. The investment hub will continue to work with Maple and M11 to pursue Orthogonal Trading for the best recovery possible.

  11. Given the funds are now returned, the investment hubs’ powers to control these funds are now entirely eliminated and all future decisions will need to be made via governance, as usual.

Now, the funds are in our Enzyme vault. There’s been a proposal that we should utilize the wETH for a buyback, given that they are already out of our smart contracts and in Enzyme, which would make completing a purchase of wNXM far easier.

Latest update on recovery following Orthogonal default

  • Maple successfully petitioned for liquidators to be put into place and Maple’s selection (Kroll) was approved by the BVI court.

  • The liquidators are in full control of Orthogonal assets.

  • The investigation and asset recovery process is currently underway, including the work to verify Orthogonal Trading’s FTX claim.

  • As with all bankruptcy processes, it can take some time to work through and it is tough to place a precise timeline on outcomes.

  • Maple’s priority is to expedite recovery of funds for affected lenders - all avenues will be considered as potential solutions arise. Then, members can vote where we have an option, to decide what path we take.

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