Decentralized lending protocol TrueFi announced that Blockwater Technologies has defaulted on a loan, which is another example of the crypto industry’s insolvency crisis.
The protocol issued a “notice of default” to the South Korean blockchain investment firm on October 6 after it failed payment on a $3.4 million loan in Binance USD (BUSD) stablecoin, according to a statement from TrueFi.
The debt default from Blockwater came about after the two firms restructured the loan and extended the payment period in August.
The blockchain investment firm has only managed to repay $654,000 of its outstanding debt following the restructuring decision. However, the firm failed to make payment on time, and the debt currently amounts to $3 million.
Defaulting on a loan means that a company has stopped making payments on a loan according to the terms and conditions agreed upon by both parties.
According to the lending protocol’s statement, TrueFi determined that “a potential court-supervised administrative proceeding would lead to a better outcome for stakeholders given the complexity around the sudden insolvency.”
“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,” Roshan Daria – head of lending at ArchBlock – responsible for managing relationships between lenders and borrowers on the TrueFi protocol, told CoinDesk.
Many crypto companies have gone bankrupt this year due to the dramatic downturn of the crypto market, which took an even worse turn after the implosion of the Terra blockchain. Companies that have suffered bankruptcy include hedge fund Three Arrows Capital (3AC), crypto lender Celsius Network, digital asset broker Voyager Digital and crypto-mining data centre operator Compute North.
TrueFi remained in “active discussion” with Blockwater. As per the statement, it said that Blockwater’s insolvency does not affect the protocol’s other lending pools.
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