On October 9, TrueFi, a decentralized lending platform, announced that Blockwater Technologies, a South Korean blockchain investment firm, had defaulted on a loan.
A “notice of default” was sent by TrueFi to Blockwater on Oct. 6 after Blockwater failed to make payment on a $3.4 million Binance USD (BUSD) loan.
“TrueFi $BUSD Pool Update: TrueFi issued a notice of default to Blockwater for non-payment on its $3.4m restructured loan,” tweeted TrueFi.
TrueFi $BUSD Pool Update:
TrueFi issued a notice of default to Blockwater for non-payment on its $3.4m restructured loan
NWH/Invictus entered a Cayman voluntary liquidation proceeding and may not repay its $1.0m loan due 10/30
Bastion has repaid its $10m loan due 10/4 in full
— TrueFi (@TrueFiDAO) October 9, 2022
One of Many Examples of the Crypto Industry’s Insolvency Crisis
It appears that Blockwater’s default is another example of the insolvency crisis in the cryptocurrency industry.
As crypto markets have plunged dramatically this year, exacerbated by the collapse of the Terra blockchain, many high-profile crypto firms have filed for bankruptcy, including hedge fund Three Arrows Capital (3AC), cryptocurrency lender Celsius Network, digital asset broker Voyager Digital, and crypto-mining data center operator Compute North.
Blockwater and its advisors remain in active discussion with TrueFi, and the credit group will focus on increasing recovery for lenders and stakeholders.
The Debt Grew After TrueFi and Blockwater Restructured Their Loan
In August, TrueFi and Blockwater restructured the loan and extended the payment period, leading to Blockwater’s default.
In the aftermath of restructuring efforts, Blockwater was able to repay $654,400 of its outstanding debt, but ultimately missed a payment. Around $3 million is left to be paid on the remaining debt.
“a potential court-supervised administrative proceeding would lead to a better outcome for stakeholders given the complexity around the sudden insolvency,” according to the lending protocol’s statement,” TrueFi stated.
“While we always prefer to pursue an out-of-court solution with distressed borrowers, in some instances an administrative proceeding is the best option in preserving value for stakeholders,” said the head of lending at ArchBlock, Roshan Daria to CoinDesk.