Since last week’s update, M11 Credit has provided an update on the Orthogonal Trading and Auros loans and Maple Finance has provided an update on their v2 launch.
M11 Credit Update
The latest update from M11 Credit on the Auros loans was provided in a Twitter statement on 11 Dec, where they shared that all of Auros’ loans “will enter arrears on-chain and begin incurring penalty interest.”
M11 Credit stated that they believe they will “be able to recover a large majority of the assets for liquidity providers.”
At this time, the Auros situation is still fluid but it does appear that a high recovery is likely according to these recent statements.
Orthogonal Trading Loans
M11 Credit issued a statement on Twitter and Medium on 14 Dec, where they shared that all Orthogonal Trading loans were declared in default on-chain.
The total value of the defaults declared with liquidation of First Loss Capital were:
M11 Credit’s first loss capital and the Pool Cover was contributed to reduce the impact to borrowers, with 22,087.36 MPL tokens allocated for an airdrop to wETH lending pool LPs to offset losses.The airdrop will be processed before 23 December 2022.
M11 Credit also shared the information about the legal process to recover funds from Orthogonal Trading:
The legal process for recovery against Orthogonal Trading continues, and we have made significant progress this week. We will have a more material update on this process and the steps being taken by early next week.
Maple Finance Update
Maple Finance launched the v2 of their protocol this week, which changed the functionality around withdrawals from individual lending pools. Subsequently, the mutual’s previous withdrawal that was initiated last week has been reset and a new withdrawal request will need to be created within Maple v2 to withdraw any available funds from the M11 Credit wETH lending pool.
Withdrawals are fairer in Maple v2 and prevents LP’s from withdrawing without taking the correct, proportional loss. When a borrower defaults, losses are passed on to the lenders in the pool and losses are shared pro rata among LPs. You can read more about the withdrawal process in Maple Finance’s v2 documentation.
If members decide to signal support for withdrawing all available capital from the wETH lending pool, the mutual will receive a prorated distribution of wETH given the partial liquidity in the pool due to the Orthogonal Trading defaults.
Factors to Consider
The situation is incredibly fluid and as new updates arise there is a need to act quickly. One example of this would be future defaults on loans that are presumed to be healthy. Another could be a meaningful change in the expected recovery rate on a defaulted or impaired loan.
Having members vote on each change slows down the process and is likely to lead to a worse outcome for the mutual and its members. Nexus Investment has contributed to this proposal, which offers members the choice to delegate the power to manage this situation to the DAO investment team.
We can only withdraw funds that are in the pool, which means waiting for loans to be paid back and for recoveries to be made. Currently, the amount of free funds in the pool is relatively small, which means that we will slowly withdraw funds over time. The length of the withdrawal increases the amount of potential decisions that could arise, making the complete process too complicated for a single member vote.
To put members in the best position possible, we have restarted the withdrawal process in Maple V2. The withdrawal window will be open from Wednesday, 21 December, to Friday, 23 December. Assuming that a fair withdrawal rate is available–compared to the expected recovery–as much wETH as possible will be withdrawn. Nexus Mutual should expect to be able to withdraw between 900 and 1,000 wETH in this period. Then, be automatically rolled to the next withdrawal window.
If members decide to delegate Nexus Investment the power to manage withdrawing 100% of the funds from Maple over time, then the DAO investment team will manage the mutual’s exit from the M11 Credit wETH pool. If there is a strong understanding that withdrawing the funds more slowly will lead to a significantly greater recovery rate, this will be done. Otherwise, as long as it’s possible to remove funds from Maple at a fair recovery rate, given the loan defaults, this will be done as quickly as possible.
Decisions for Members to Discuss
Decision #1: Should the mutual continue to withdraw funds from the Maple/Maven 11 wETH pool with the aim to fully withdraw funds as they become available?
Decision #2: On the basis of a decision to fully withdraw, should the mutual delegate the process of withdrawing to the Nexus Investment team for execution, or should the mutual return to Snapshot votes for each individual decision?
- Snapshot Signalling Vote | Timeline
After discussion has taken place, a Snapshot signalling vote will be used to gauge members’ sentiment on the potential voting options that result from this discussion.
Due to the constrained timeline, a Snapshot signalling vote willl take place next week, so members can signal their support for the best way forward while the withdrawal window is open between 21–23 December.