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Warbler Labs, the pool management protocol, announced over the weekend through its management forum that the $20 million tokenized credit in the Goldfinch DeFi credit pool has defaulted following the underperformance of investments in real estate technology company and digital asset investments made by the indebted Stratos.
Details of the $20 Million Tokenized Credit
The troubled pool had provided a four-year $20 million (USDC) stablecoin loan to fintech credit fund Stratos in February 2022, with an annual interest rate of 11%, and Warbler Labs became the borrower. Warbler Labs stated that approximately $7 million of the funds are at risk of loss.
The announcement stated that Stratos allocated $5 million of the funds to REZI, a real estate technology company focused on apartment rentals in major cities in the United States, and REZI has currently stopped making payments and is expected to liquidate its position. $2 million of the funds were allocated to digital asset investments named POKT, which Warbler Labs claimed to be unaware of during the investment. Stratos closed this position almost at a complete loss and added collateral for the closure. Warbler Labs stated that all losses of investors in the pool will be covered.
Warbler Labs co-founders Michael Sall and Blake West stated in a post regarding the issue, “This is at best a disappointment and an unexpected situation,” adding, “Warbler Labs will take full responsibility for all risks and recovery, and we have decided to support the losses related to REZI and POKT, excluding the positions of Warbler Labs and Stratos.” The remaining $13 million from the loan was allocated to Threecolts, a successful e-commerce marketplace management initiative.
Risks Surrounding the Securitization of Tokenized Real-World Assets
The defaulted loan, which unexpectedly deteriorated, highlights the risks of tokenized real-world assets (RWA), such as private loans, which have become one of the latest trends in the cryptocurrency industry. This situation also puts a focus on the process of situation assessment carried out in blockchain-based RWA lending protocols, especially after the default of loans granted to cryptocurrency trading companies last year.
This development follows another credit crisis in the Goldfinch pool after the default of a $5 million loan from African motorcycle taxi financing company Tugende, which will mature in October. In a statement from Goldfinch management, it was mentioned that the debtor violated the loan contracts by providing intercompany loans to address the financial difficulties of a sister company.
An anonymous user named Wiz stated over the weekend on the management forum of the platform, “This is the second occurrence of a borrower’s lack of transparency or the lack of auditing capacity of Goldfinch. We can all appreciate that Warbler Labs will cover the loss, but it is increasingly concerning to discover a complete lack of control by the loan borrower, especially considering Stratos’ status as an equity investor in Goldfinch.”
