Terra-Victim Invictus Capital Defaults on $1M TrueFi Loan

This is the second time in a month that a lender defaulted on an unsecured loan on the decentralized lending protocol.

AccessTimeIconNov 1, 2022 at 10:39 p.m. UTC
Updated Nov 2, 2022 at 2:33 p.m. UTC

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.

Failed crypto hedge fund Invictus Capital failed to repay a loan from decentralized lending protocol TrueFi, according to TrueFi’s loan data dashboard.

The firm missed paying down its $1 million loan denominated in Binance USD (BUSD) stablecoin, which was due to mature on Oct. 30. The debt was uncollateralized, meaning that Invictus did not pledge any assets against it, and secured the loan by its reputation and good financial standing at the time.

CoinDesk - Unknown

Invictus Capital failed to repay its debt on lending protocol TrueFi until the Oct. 30 deadline. (TrueFi)

TrueFi warned investors in a Twitter post in early October that Invictus might fail to repay the loan. New World Holdings, Invictus’ Cayman Islands-based parent company, entered into voluntary liquidation after suffering a blow in the crypto rout initiated by the multibillion-dollar implosion of once-top blockchain project Terra. Invictus reportedly moved investor funds to Terra’s failed stablecoin UST and to crypto lender Celsius Network that went bankrupt in July.

TrueFi has not issued a “notice of default” to Invictus yet. Invictus borrowed $28.8 million and paid it back with interest on TrueFi through 2020 and 2021 before defaulting on its latest loan, according to TrueFi’s dashboard.

“Invictus’ default once again illustrates the fragility of trust-based uncollateralized lending,” Walter Teng, vice president of digital asset strategy at research group Fundstrat, told CoinDesk.

This is the second uncollateralized loan to default on TrueFi within a month following Korea-based Blockwater’s failure to repay its $3 million debt on the platform. Another decentralized lending protocol, Maple Finance, faced difficulties in June after Babel Finance, a crypto lending firm, became insolvent and defaulted on a $10 million loan. The default resulted in a $7.9 million loss to investors. Maple decided to tighten its lending standards, Bloomberg reported last month.

These defaults amid the ongoing shakeout among struggling crypto firms show the risks and challenges of incorporating unsecured lending – which is widespread in traditional markets – to decentralized finance in the young,volatile digital asset market.

CoinDesk sent inquiries to TrueFi and Alvarez & Marsal, New World Holding’s representative in the court-assisted liquidation, for comment.

DISCLOSURE

Please note that our privacy policy, terms of use, cookies, and do not sell my personal information has been updated.

The leader in news and information on cryptocurrency, digital assets and the future of money, CoinDesk is a media outlet that strives for the highest journalistic standards and abides by a strict set of editorial policies. CoinDesk is an independent operating subsidiary of Digital Currency Group, which invests in cryptocurrencies and blockchain startups. As part of their compensation, certain CoinDesk employees, including editorial employees, may receive exposure to DCG equity in the form of stock appreciation rights, which vest over a multi-year period. CoinDesk journalists are not allowed to purchase stock outright in DCG.

CoinDesk - Unknown

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.

CoinDesk - Unknown

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.