Crypto Firm Orthogonal, Victim of FTX Contagion, Now Faces Internal Dissent

Shortly after Orthogonal got served with default notices on $36 million of crypto loans from Maple Finance, the firm’s credit team published a statement saying it was “speechless” and unaware of the extent of the trading team’s exposures.

AccessTimeIconDec 6, 2022 at 8:22 p.m. UTC
Updated Dec 6, 2022 at 8:30 p.m. UTC

Rifts have emerged between defaulted crypto trading firm Orthogonal Trading and its own lending unit, Orthogonal Credit, after an apparent default on some $36 million of loans on the blockchain-based lending platform Maple Finance.

On Monday, Maple said it had severed ties with Orthogonal Trading after the firm failed to make a $10 million payment that was due, triggering defaults across all of its debt within lending pools for the stablecoin USDC and wrapped ether (wETH). Maple said Orthogonal Trading had misrepresented its exposure to Sam Bankman-Fried’s collapsed FTX exchange.

Now, officials with Orthogonal Credit have come forward with a Medium post claiming they were kept out of the loop on the depth of Orthogonal Trading’s financial troubles and weren’t aware of the hole in the trading book. Orthogonal Credit, which oversaw a $30 million stablecoin lending pool named Orthogonal Trading - USDC001 on Maple, was also booted from Maple’s protocol.

“We are shocked and dismayed,” Orthogonal Credit said in the statement. “We are speechless by the extent of the exposure and liquidity position of Orthogonal Trading’s book of business.”

Orthogonal Trading, in its own brief statement released late Monday, acknowledged that it was “severely impacted by the collapse of FTX” and had been “working closely with a potential strategic investor regarding fresh funding to cover all outstanding liabilities, with good progress being achieved,” but the money didn't come through in time to meet the $10 million payment due.

“This resulted in the default of this loan and subsequently the unsuccessful conclusion to the talks we were engaged in,” Orthogonal Trading wrote.

Orthogonal Credit said in the Medium post that it operated as structurally separate from the trading business. But it said the credit business was affected because the trading unit provided funds for the so-called “first-loss capital” for the Maple lending pool managed by Orthogonal Credit. This first-loss capital is supposed to be available as a form of security back-up fund – liquidated first when a borrower defaults, per Maple’s mechanism.

That first-loss capital “will become a claim” to creditors of the lending pool, according to Medium post.

“In light of this development, the Credit Team is actively seeking strategic solutions to continue to provide Credit-as-a-Service across self-custodial decentralized finance protocols,” Orthogonal Credit said.

Orthogonal Trading, which hasn’t returned CoinDesk’s requests for comment, is the latest crypto trading firm to get caught off-guard by FTX’s stunning collapse, with assets effectively stuck on the crypto exchange after a withdrawal freeze and subsequent bankruptcy filing.


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

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