Crypto Trader Auros Global Misses Payment on DeFi Loan as FTX Contagion Spreads

Auros Global, a crypto trading firm, is the latest to face liquidity problems following the FTX collapse as it missed payment Wednesday on a decentralized-finance (DeFi) loan.

The firm borrowed 2,400 wrapped ether (wETH) worth about $3 million from a credit pool on Maple Finance, a DeFi lending platform.

“Auros is experiencing a short-term liquidity issue as a result of the FTX insolvency,” pseudonymous credit pool manager M11 Credit tweeted.

Auros joins other digital-asset firms, including BlockFi and Genesis Global Capital, that face financial difficulties as contagion spreads across the crypto industry. This phase of the now yearlong market rout started as crypto exchange FTX and its corporate sibling Alameda Research became insolvent and filed for bankruptcy protection earlier this month. Genesis is a unit of Digital Currency Group, which also owns CoinDesk.

Auros’ unsecured debt

There were ominous signs that indicate Auros is in a precarious liquidity position.

The trading firm borrowed 2,000 wETH ($2.6 million) with a 14-day maturity on Nov. 27, only three days before M11’s statement about Auros’ short-term liquidity problems. Altogether, Auros has an outstanding debt of 8,400 wETH ($10.7 million) to M11’s wETH credit pool on Maple, according to Maple’s loan dashboard.

The same day, Auros also took out a two-week loan of $7.5 million in USDC stablecoin from another M11-managed pool on Maple.

Read more: FTX Files for Bankruptcy Protection in US; CEO Bankman-Fried Resigns

Auros also owes a $2.4 million outstanding debt in USDC to two separate credit pools on DeFi lender Clearpool’s platform, according to Clearpool credit dashboard. Both loans reach the maximum, meaning the borrower has to pay an unusually high interest rate (around 23% annualized percentage rate at press time) for the loans.

Credora, a crypto credit rating firm that works with Clearpool, downgraded Auros’ creditworthiness to grade C (with AA being the best grade).

These loans are unsecured, meaning that the borrower did not pledge any assets against the loans and secured them with its allegedly good financial standing and trust that it would pay back.

If Auros cannot find a way out of its liquidity crunch, these loans are at risk of default, leaving the already embattled lending platforms with bad debt and threatening creditors with losses.

Auros Global did not return a request for comment. CoinDesk also reached out to Maple, M11 Credit and Clearpool for comment.

Unsecured crypto lending under stress

Auros’ missed payment is another blow to unsecured crypto lending’s current business model.

Multiple loans from decentralized lending protocols defaulted in the last few months as digital asset trading firms faced insolvencies during the crypto market’s devastating downturn.

Blockwater, Invictus Capital and Alameda failed to pay back their loans from credit pools on TrueFi, leaving the platform with $11 million of bad debt. Creditors on Maple stomached a $7 million loss after Babel Finance’s loan was liquidated in June.

Unsecured credit providers such as Clearpool, Maple and TrueFi claim to be decentralized to a degree. However, they have to resort to traditional, time-consuming and rather centralized measures such as debt restructuring or court-assisted liquidation in case a loan defaults.

Read more: TrueFi's $4M Bad Debt in Limbo Shows Risk of Crypto Lending Without Collateral

UPDATE (Nov. 30, 20:49 UTC): Adds details about Auros Global’s outstanding debt and context about unsecured crypto lending.