Katherine Ross

Crypto exchange Bittrex is approved to borrow $6.8 million in bitcoin to fund its US Chapter 11 bankruptcy.



In the court hearing, which took place this week in Wilmington, Delaware, Bittrex’s lawyers said the exchange had enough crypto to return customer funds. The loan would instead be used to protect and ensure a smooth bankruptcy process for both customers and the company.&nbsp;



According to a <a href="https://www.reuters.com/markets/deals/bittrex-approved-borrow-7-mln-bankruptcy-loan-bitcoin-2023-05-10/">Reuters</a> report, Judge Brendan Shannon approved the loan, allowing Bittrex to borrow 250 bitcoin (<a href="https://blockworks.co/price/btc">BTC</a>) on an interim basis from Aquila Holdings — its parent company.&nbsp;



Seattle-headquartered <a href="https://blockworks.co/tag/bittrex">Bittrex</a> is expected to ask for an additional 450 BTC ($12.2 million) in June. The company filed for bankruptcy on May 8.



However, it <a href="https://blockworks.co/news/bittrex-us-shutdown">halted US operations</a> at the end of April, days before the <a href="https://blockworks.co/news/bittrex-ceo-sec-wells-notice">SEC sent both Bittrex US and Bittrex Global</a> a Wells notice and <a href="https://blockworks.co/news/bittrex-hit-with-sec-lawsuit">sued Bittrex US</a> for running an unregistered securities exchange. Bittrex Global is incorporated in Liechtenstein.



In the suit, the SEC <a href="https://blockworks.co/news/sec-names-other-tokens-bittrex-lawsuit">alleges that six of the tokens</a> listed on Bittrex fall under the definition of securities under current law, including algorand (<a href="https://blockworks.co/price/algo">ALGO</a>) and <a href="https://blockworks.co/price/dash">DASH</a>. Bittrex did not immediately return a request for comment.



Bittrex Global CEO <a href="https://blockworks.co/news/bittrex-ceo-sec-wells-notice">Oliver Linch previously told Blockworks</a> the decision to shutter Bittrex US came because “we only believe in doing the right thing and we, literally, can’t because we don’t know what that means.”



According to Linch, neither Bittrex US nor Bittrex Global were given the opportunity to respond to the SEC’s Wells notice, though lawyers from Bittrex have been in contact with the SEC since.



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bankruptcy

Bitcoin Loan Can Help Fund Bittrex Bankruptcy, Court Rules

Sebastian Sinclair

Upstart NFT marketplace Blur’s lending protocol, Blend, is off to a flying start.



The platform, which allows users to borrow crypto against digital collectibles in perpetuity, has so far witnessed 51,656 ETH ($95 million) in loans since its inception 10 days ago, a Dune dashboard shows. More than 3,000 individual Blend loans have been opened to date.



Blend’s <a href="https://blockworks.co/news/blur-blends-defi-nfts" target="_blank" rel="noreferrer noopener">May 1 launch</a> helped drive overall NFT loan volume to record highs, hitting $67 million over the week. Blend loans made up 75% of that figure, outstripping competing platforms such as NFTfi, Arcade, X2Y2 and BendDAO.



For scale, cumulative NFT loan volume in US dollars stands at more than $1 billion across 76,000 loans. There’s currently nearly $150 million in outstanding debt, per a separate <a href="https://dune.com/goyem/theflock" target="_blank" rel="noreferrer noopener">dashboard</a>.



Blend currently supports loans backed by four NFT collections: anime-inspired Azukis, street-stylish Miladys, deity-centric DeGods and wrapped versions of seminal CryptoPunks. 



Read more: <a href="https://blockworks.co/news/how-nft-lending-works" target="_blank" rel="noreferrer noopener">How Does NFT Lending Really Work? A Deep Dive</a>



Azuki is so far the most popular collateral on Blend so far, representing nearly half of the 4,194 ETH ($7.7) in active loans.



Those lending out ether against Azuki-backed collateral are earning an average of 17% APY, data shows. Wrapped CryptoPunks, which have 952 ETH ($1.7 million) in active loans, stands much higher — averaging 39% annual percentage yield for lenders.



The process is as follows:



<ol class="wp-block-list">
<li>Deposit: As a borrower, you lock your NFT into Blend as collateral</li>



<li>Set terms: Specify the loan terms, including ETH amounts and interest rate</li>



<li>Lender acceptance: Lender agrees to your terms and provides ETH</li>



<li>ETH transfer: You receive the lender&#8217;s ETH; your NFT stays in Blend as collateral</li>



<li>Accruing Interest: Over time, the lender earns interest on the loan</li>



<li>Repayment/liquidation: Repay the loan to get the NFT back. Defaulting or failure to refinance via auction means the lender collects the NFT.</li>
</ol>



<figure class="wp-block-image size-large"><img loading="lazy" decoding="async" width="1704" height="938" src="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=1024&amp;h=1024" alt="" class="wp-image-55054" srcset="https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=1704 1704w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=300 300w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=1024 1024w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=768 768w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=1536 1536w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=428 428w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=470 470w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=389 389w, https://blockworks-co.imgix.net/wp-content/uploads/2023/05/Screen-Shot-2023-05-10-at-13.47.38.png?w=80 80w" sizes="auto, (max-width: 1704px) 100vw, 1704px" /><figcaption class="wp-element-caption">Azuki collateral is good collateral on Blend (<a href="https://dune.com/beetle/blur-loans" target="_blank" rel="noreferrer noopener">source</a>)</figcaption></figure>



Floor prices across all four supported NFT collections have varied over the past 30 days, with Azuki, DeGods and Miladys falling between 1% and 10%. 



Miladys is the outlier, up around 69% going from 2.24 ETH ($4,140) to 3.8 ETH ($7,020), per OpenSea. Ether has fallen about 3% over the same period.



Generally, lenders would be willing to dish out ether in return for NFTs if they believe the tokens won’t massively decline in value — or the interest rate on offer is worth their while.



As it turns out, there seems to be many out there eager to take that bet.



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Blur

Blur Users Open $95M Loans Backed By NFTs in 10 Days

Shalini Nagarajan

Crypto users can soon provide their credit scores when making blockchain-based credit applications via major US credit bureau TransUnion.



TransUnion’s new crypto-focused service will provide individuals’ credit scores to blockchain dapps when they apply for DeFi loans. Their scores will be based on their credit histories.



“Credit scoring is an important tool for lenders to help mitigate risk regardless of the platform being used,” Jason Laky, TransUnion’s executive vice president of financial services, said in a <a href="https://newsroom.transunion.com/transunion-spring-labs-and-quadrata-partner-to-deliver-credit-scoring-to-blockchain/" target="_blank" rel="noreferrer noopener">statement</a>. 



Blockchain data platform Spring Labs and Web3 identity solution provider Quadrata partnered with TransUnion on the initiative. In 2021, TransUnion led a <a href="https://techcrunch.com/2021/05/11/why-transunion-led-blockchain-fintech-spring-labs-30m-series-b/" target="_blank" rel="noreferrer noopener">$30 million</a> investment in Spring Labs’ Series B.



Consumers can request their credit data from Chicago-headquartered TransUnion, which they will then choose to share with the relevant dapp. TransUnion says user privacy will be preserved in the process.



The partnership will allow DeFi lenders to access “critical information when making their lending decisions with confidence, ultimately minimizing their risk, and providing borrowers more opportunity for better terms,” Laky added.



<h2 class="wp-block-heading">TransUnion crypto push strengthens case for DeFi</h2>



TransUnion’s crypto move comes after <a href="https://blockworks.co/news/ftx-not-worst-bad-thing-in-crypto-this-year" target="_blank" rel="noreferrer noopener">one of worst sell-offs in history</a> following the collapse of algorithmic stablecoin ecosystem Terra last year.



Roiled markets exposed lenders to unsecured loans threatening their balance sheets. This type of high-risk lending led to a wave of defaults that left several crypto companies anxious about the ensuing domino effect. 



The transparent nature of DeFi could <a href="https://blockworks.co/news/can-defi-handle-new-wave-of-users" target="_blank" rel="noreferrer noopener">mitigate those concerns</a> in future scenarios, proponents say.



“As more consumers and lenders move to blockchain to conduct business, it’s important to ensure that the balance is struck between the information that lenders need to assess risk and the privacy and anonymity expected by users of the technology,” said John Sun, CEO of Spring Labs, in a statement.



“This new product featuring TransUnion’s identity and credit data at its core is a big step toward achieving that balance and allowing more lending opportunities on blockchain while minimizing risk.”



Credit scores in Web3 aren’t a new concept. Quadrata previously <a href="https://www.businesswire.com/news/home/20230126005065/en/Quadrata-Brings-Digital-Identity-to-DeFi-Through-Partnerships">partnered</a> with nine DeFi protocols including TrueFi and Cred Protocol to provide KYC and anti-money laundering risk scores. 



And last year, a credit risk assessment startup Spectral raised <a href="https://techcrunch.com/2022/08/24/spectral-raises-23m-to-help-create-web3-credit-scores/">$23 million</a> to build and refine its credit scoring network.



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credit rating

Borrowing Crypto With DeFi? TransUnion Shares Real-world Credit Scores

John Lee Quigley

John Gilbert

The Best Bitcoin Loan Platforms of 2023

The Investor’s Guide to Bitcoin and Crypto Loans

Bessie Liu

Crypto lending platform Maple Finance has introduced a protocol upgrade, dubbed Maple 2.0, after experiencing two major loan defaults from borrowers on its platform.



Maple Finance, a decentralized credit marketplace running on Ethereum, allows institutional borrowers to take out undercollateralized loans from a credit pool once they meet risk-management criteria. 



But recent hiccups by participants have forced Maple to reconsider its product strategy, modifying the protocol to speed up default processes. In the past, even if a borrower admitted they could not make payments in advance, they were given a grace period before being put into default.&nbsp;



Now, loans are payable immediately once a borrower meets the condition of default — and if a borrower doesn’t pay within the grace period, delegates (loan underwriters) can liquidate the loan and pool lenders realize a loss immediately whilst pursuing recovery.&nbsp;



“In the instance when a borrower meets a condition of default, a Pool Delegate will be able to declare an early default. This declaration will bring the loan payable immediately,” Maple said.



“When a borrower doesn’t pay within the grace period the Delegate can liquidate the loan, and all lenders in a pool will realize a loss immediately whilst recovery is pursued.”



Pool delegates must also provide “first loss capital,” funds pegged to go first upon a default. Maple believes this will better align incentives between lenders and delegates; players who spin up a Maple pool will be forced to have skin in the game from the get go.



Other Maple 2.0 upgrades include prorated and scheduled withdrawals, where lenders can request withdrawals at any time instead of waiting a minimum of 30 days to withdraw after depositing.



This move will also lessen potential for gamification, the Maple team <a href="https://www.maple.finance/news/maple-2-0-new-smart-contracts-products-and-our-2023-strategy/" target="_blank" rel="noreferrer noopener">wrote</a> in a blog post. 



Interest will also be automatically compounded and reinvested into pools, removing the need for administration and redepositing.



<h3 class="wp-block-heading">The trigger for Maple 2.0 changes</h3>



Maple revealed earlier this month that it would be <a href="https://blockworks.co/news/orthogonal-hid-ftx-exposure" target="_blank" rel="noreferrer noopener">cutting ties</a> with Orthogonal Trading, a Maple borrower, after it misrepresented its financial position following FTX collapse and failed to meet loan repayments on the platform&#8217;s M11 Credit USDC lending pool. 



“The recent default by Orthogonal Trading has made clear the immediate need for improvement on features in the Maple 2.0 upgrade — specifically the need to declare early default on a loan,” M11 Credit <a href="https://medium.com/@M11PoolDelegate/maple-2-0-implications-on-m11-pools-b2e19f803990" target="_blank" rel="noreferrer noopener">wrote</a> in a blog post. Maple will also stop servicing loans on the Solana blockchain, which it began earlier this year.



Another Maple borrower, algorithmic trading and market making firm, Aurous, also <a href="https://blockworks.co/news/nexus-loses-millions-in-maple-finance-credit-pool" target="_blank" rel="noreferrer noopener">missed payments</a> totalling 2,400 wETH ($2.9 million) in the same lending pool.



M11 Credit has since <a href="https://medium.com/@M11PoolDelegate/m11-credit-update-on-orthogonal-trading-9f896c264f8f" target="_blank" rel="noreferrer noopener">declared default on-chain</a> on credit loans totalling 31 million USDC and 3,900 wETH ($4.7 million)



Outstanding Auros loans will remain in a late, unpaid status after a <a href="https://medium.com/@M11PoolDelegate/maple-2-0-implications-on-m11-pools-b2e19f803990" target="_blank" rel="noreferrer noopener">review</a> on the financial position of Auros deemed “that even without a successful restructure, we should be able to recover a large majority of the assets for liquidity providers.”



A legal recovery process is <a href="https://medium.com/@M11PoolDelegate/m11-credit-update-on-orthogonal-trading-9f896c264f8f" target="_blank" rel="noreferrer noopener">in the works</a> for Orthogonal Trading losses and withdrawal requests will be processed alongside the Maple 2.0 update. 



“2022 has highlighted opportunities for improvement at a protocol and industry level,” the Maple team wrote. “We hope that Maple 2.0 is evidence of our commitment to continuous improvement and that the Maple team endeavors to be a long-standing, credible ecosystem player.”&nbsp;



Maple will also adopt another token standard, ERC-4626, for further interoperability and partnerships within DeFi — however it will stop servicing loans via the Solana blockchain, nine months after it began doing so.



A 2023 product roadmap which supports Maple’s objectives will be released in the coming weeks.



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Loans

Maple Finance Opts for Immediate Defaults To Curb Bad Loans

<div id="highlights-block_63486295154b3" class="highlights">
 <ul>
 <li>Existing investors Dragonfly Capital, Nascent and Ethereal Ventures participated</li>
 <li>The raise will be used to expand MetaStreet’s products</li>
 </ul>
 
</div>



MetaStreet, a metaverse-oriented decentralized interest rate protocol, has raised a fresh round of venture funding as the startup readies its latest product.&nbsp;



The $10 million capital raise — ahead of the launch of what MetaStreet dubs “PowerSweep” — brings the company’s one-year funding haul to $24 million.&nbsp;



The round received participation from existing investors from Dragonfly Capital, Nascent and Ethereal Ventures. New investors include Fintech Collective, DCG, TheLAO, Focus Labs, Mirana Ventures, Metaversal, OpenSea Ventures, Ledgerprime, Meta4 and Flying Falcon.



In an exclusive interview with Blockworks, Conor Moore, co-founder of MetaStreet, said all the capital raised will be going toward product development, marketing and hiring.



“Previously we were only focused on the capital deposit side of the equation, and now we’re expanding our offering to help solve problems directly for borrowers,” Moore said.



MetaStreet operates as a capital provider and is the architect behind the infrastructure required to automate the underwriting and execution of fixed-rate, NFT-backed loans. 



Its latest product, PowerSweep, is vying to increase the purchasing power of NFT traders by allowing them to buy and sell NFTs on margin via Reservoir, a Web3-native NFT order book protocol.



“The integration with MetaStreet basically allows users to make a transaction but do it with leverage instead of all their own capital,” Moore said. “It&#8217;s focused on borrowers and the origination side of the equation.”



Moore said that the next iteration of their product would be to improve scale and efficiency on the borrower side.



MetaStreet has facilitated around $40 million of lending volume to date, according to Moore. In fact, the protocol was the facilitator of <a href="https://cms.blockworks.co/nft-lending-market-reveals-a-need-for-liquidity/" target="_blank" rel="noreferrer noopener">two of the largest</a> NFT-backed loans at 8.3 million DAI and 8 million DAI respectively.&nbsp;



After launching its vault product, Moore says at any given time there are roughly a few million dollars in the vault from users.&nbsp;



“We’re fortunate to be deeply entrenched in NFT finance at such a formative period of time in the lifecycle of the metaverse,” Moore said.&nbsp; “This is one of those unique moments in an industry’s growth where everyone who’s here today is simply focused on bringing new users into the space, an entire blue ocean of opportunity.”



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Funding

MetaStreet Secures $10M for NFT Loans in the Metaverse

Ben Strack

<div id="highlights-block_62f40b2dad3f8" class="highlights">
 <ul>
 <li>Genesis’ loans outstanding dropped from $14.6 billion in the first quarter to $4.9 billion in the second quarter</li>
 <li>The firm’s custody business processed its highest number of quarterly transactions, an 8% jump from the first quarter</li>
 </ul>
 
</div>



New loans from Genesis&#8217; lending desk declined 9% during this year’s second quarter, the firm revealed Wednesday, while active loans outstanding dropped 66% from the prior period. 



<a href="https://cms.blockworks.co/tag/genesis/" target="_blank" rel="noreferrer noopener">Genesis</a> launched the first over-the-counting bitcoin trading desk in the US in 2013 and facilitates billions in monthly crypto trades, loans and transactions. 



The company’s active loans outstanding, as of June 30, amounted to $4.9 billion — down from $14.6 billion at the end of the first quarter. Challenging credit markets gripped the industry during the past three months.



US dollars and equivalents made up almost 54% of Genesis’ loan book, up from 48% at the end of the first quarter amid what the report called a “flight to quality.”&nbsp;



Bitcoin now makes up more of Genesis’ book, with its BTC loan weight rising from 28.7% to 30.4% quarter over quarter. Ether’s weight shrunk from 16% in the first quarter to 11.4% at the end of June, reflecting its relative price underperformance from April through June.&nbsp;



Genesis’ lending desk originated roughly $40.4 billion — down 9% quarter over quarter — as crypto lending suffered a strong contraction in recent months. Most of those loans occurred in April and May, as the collective crypto market capitalization shed more than 40%, from $2.2 trillion to less than $1.3 trillion.



A Genesis spokesperson declined to comment beyond the report.&nbsp;&nbsp;



<h3 class="wp-block-heading">Digital Currency Group absorbed Genesis losses</h3>



This year’s second quarter will likely be remembered as “one of the more dramatic in the crypto ecosystem’s history,” the report says.



<a href="https://cms.blockworks.co/crypto-fund-three-arrows-capital-facing-potential-insolvency-report/" target="_blank" rel="noreferrer noopener">Three Arrows Capital (3AC) first revealed it was facing potential insolvency</a> in June after a $400 million liquidation. 3AC took a major hit with the <a href="https://cms.blockworks.co/tag/terra/" target="_blank" rel="noreferrer noopener">collapse of Terra’s stablecoin</a> in May due to substantial investment in the ecosystem’s LUNA token.



Though <a href="https://cms.blockworks.co/genesis-reveals-exposure-to-bankrupt-three-arrows-capital/" target="_blank" rel="noreferrer noopener">Genesis had loan exposure to 3AC</a>, Genesis parent company Digital Currency Group assumed liability of losses from those loans, the company noted in Wednesday’s report.



<a href="https://www.linkedin.com/in/simon-jones-9498239b/?originalSubdomain=uk" target="_blank" rel="noreferrer noopener">Simon Jones</a>, CEO and co-founder of <a href="https://www.voltz.xyz/" target="_blank" rel="noreferrer noopener">Voltz Labs</a>, told Blockworks Genesis’ falling lending numbers reflect what he called the “CeFi collapse” and macroeconomic factors. Centralized finance lender Celsius, for example, <a href="https://cms.blockworks.co/celsius-to-file-for-bankruptcy-imminently-report/" target="_blank" rel="noreferrer noopener">initiated bankruptcy proceedings</a> last month after <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">suspending withdrawals and transfers</a> in June. 



“Some of these lending businesses are getting squeezed on both sides,” Jones said. “If they are sourcing capital from traditional finance…rates are going up, and then in DeFi, yields are going down, which basically means the rate they can charge to a borrower…is going down.”



Though Genesis’ new loans and active loans outstanding saw declines, the company’s spot desk traded about $17.2 billion in the second quarter — a 51% increase from the prior quarter. Its derivatives desk traded $26.6 billion, down 4%.



Genesis Custody processed its highest number of quarterly transactions, an 8% increase from the first quarter. The business also saw a 20% jump in the number of custody clients during the period.



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Genesis

Genesis Active Loans Dropped 66% in Q2

Sam Reynolds

<div id="highlights-block_6195746f3417a" class="highlights">
 <ul>
 <li>Maple Finance is launching a syndicated loan product with Alameda Research, to provide Alameda with trading capital and institutional investors exposure to their DeFi yields</li>
 <li>The loan is currently at $25 million, with plans to expand it to $1 billion over the course of a year</li>
 </ul>
 
</div>



For institutions, DeFi can produce some eye-watering yields in the double or even triple digits. However, <a href="https://cms.blockworks.co/vesper-joins-forces-with-blockforce-to-create-defi-fund/" target="_blank" rel="noreferrer noopener">to get access to these yields</a>, institutions need to hold tokens, which is an obstacle due to infrastructure, education and even compliance reasons. 



In an effort to solve this problem, Maple Finance is providing an alternative: a syndicated loan product for Alameda Research — a trading firm, market maker, and investor —&nbsp;designed specifically for large-cap institutions to access debt capital markets.



This would allow institutional investors to get access to yields from Alameda’s trading, or the tokens it invests in: the eponymous “<a href="https://dchained.com/blog/the-rise-of-sam-coins/" target="_blank" rel="noreferrer noopener">Sam Coins</a>” named after Alameda’s Co-CEO Sam Trabucco, and founder Sam Bankman-Fried.&nbsp;



<blockquote class="wp-block-quote is-layout-flow wp-block-quote-is-layout-flow">“This is a first where a crypto company is syndicating a loan through an on-chain vehicle to other institutional investors in the space,” explained Maple Finance CEO Sid Powell in an interview with Blockworks. “This allows Alameda to tap capital from institutional investors. They can use this for their trading, investments or other business purposes.”</blockquote>



Institutions don’t need to have a specific opinion on a DeFi token, Powell explained, as they will get yield from Alameda’s activities, broadly.



Powell equates this to setting up a figurative crypto SPAC, bypassing the usual investment banks — that might see Alameda as toxic anyways — and directly connecting borrowers with lenders.&nbsp;



“Companies previously went through investment banks to tap capital markets, then they started going directly and taking charge of their own presence there,” Powell said.&nbsp;&nbsp;



This process is long and bureaucratic, according to Powell, who gave an anecdote about the process of a syndicated loan from a traditional financial institution like JPMorgan. “That’ll take 12 weeks,” he said.&nbsp;



But because of the blockchain-based nature of Maple Finance’s syndicated loan, it can be expanded on-demand or Alameda can create a separate series of loans when required.&nbsp;



“It’s the <a href="https://cms.blockworks.co/webinars/the-defi-mullet-the-future-of-defi-and-fintech/" target="_blank" rel="noreferrer noopener">DeFi mullet</a>,” Powell said, referring to the process that pairs institutional compatible FinTech at the front and DeFi at the back. 



At launch, the loan is currently $25 million with plans to expand it to $1 billion over the next year.



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