According to Walter Teng, “Invictus’ default once again illustrates the fragility of trust-based uncollateralized lending.”
Terra victim, Invictus Capital, has failed to repay a loan from the decentralized lending protocol, TrueFi. The embattled crypto hedge fund missed paying its $1 million loan, denominated in Binance USD.
TrueFi made this known in an update on its Twitter page.
Invictus Capital defaulted in making a payment due on October 30. The debt was uncollateralized, meaning it didn't pledge any asset against the loan. It secured the loan with its good reputation and financial strength at the time.
However, New World Holdings, the parent company of Invictus, entered into voluntary liquidation after receiving a hard blow due to the collapse of the Terra project. It was made known that Invictus moved investors’ funds to Terra USD and later to Celsius Network, which also went bankrupt in July.
According to TrueFi’s dashboard, Invictus Capital borrowed $28.8 million and paid back the loan with interest through 2020 and 2021 before it failed in the recent loans.
Recall that early in October, TrueFi told investors that Invictus Capital might be unable to repay the loan. The lending protocol is yet to issue a notice of default to Invictus.
This is the second uncollateralized loan to default on TrueFi in a month following Blockwater’s inability to repay its $3 million debt on the lending platform.
A similar case also happened with the lending protocol Maple Finance. The platform faced difficulties in June after Babel Finance, a crypto lending firm, filed for insolvency and defaulted on a $10 million loan. This resulted in about a $7.9 million loss for Maple investors.
FundStrat Vice President, Walter Teng, reacted to this development, pointing out the risk in unsecured lending.
He said,
“Invictus’ default once again illustrates the fragility of trust-based uncollateralized lending.”
