TrueFi Issues First Default to Crypto Investment Firm Blockwater on BUSD Loan

Decentralized finance (DeFi) lending protocol TrueFi issued a “notice of default” to Blockwater Technologies on October 6th for failing to make a scheduled payment of more than $3.4 million loan in BUSD.

The crypto market rout in Q2 and the resultant ongoing stress have unraveled several digital-asset lenders and exchanges. The liquidity crisis spurred the bankruptcies of $10 billion crypto hedge fund Three Arrows Capital (3AC) and crypto lenders Celsius and Voyager Digital. It also led to the unwinding of DeFi. Blockwater’s default appears to be the latest instance in the digital asset industry’s insolvency crisis.

Blockwater Defaults on DeFi Loan

In a statement, TrueFi stated that its credit group led an exhaustive out-of-court workout with the principals of the South Korean blockchain investment firm, including a loan amendment to increase the borrowing rate and extend maturity. However, they agreed that a potential court-supervised administrative proceeding would lead to a better outcome for stakeholders, given the “complexity around the sudden insolvency.”

So far, Blockwater has reportedly made 8 payments adding up to over $645k towards loan repayment. The company still has to pay the remaining $2.9 million in debt.

“The Blockwater default does not affect lenders in TrueFi’s USDC, TUSD, USDT stablecoin lending pools, nor any of TrueFi’s capital market portfolios.”

TrueFi asserted that it is in active discussion with Blockwater and its advisors. The credit group is currently focused on maximizing recovery on behalf of the lenders and stakeholders. According to TrueFi, the debt represents about 2% of its total outstanding value, and added that it will continue to remain vigilant overall with borrowers considering the challenging market conditions.

TrueFi’s Unsecured Loans

According to the update, the lending platform has originated more than $1.7 billion in unsecured loans and successfully collected nearly $1.5 billion in repayments across 136 loans. In doing so, it has managed to generate $34.34 million in interest for lenders.

Despite the market-wide rout, TrueFi believes the borrower demand continues to be high while outpacing available capital. TrueFi also confirmed that its loan book remains “healthy and active across both crypto-native and real-world lending.” It also maintained that the Blockwater default does not affect lenders in its USDC, TUSD, or USDT stablecoin lending pools, nor any of its capital market portfolios.