The FTX dominoes continue to tumble, as Nexus Mutual revealed roughly $3 million in losses due—via a long string of contiguous events—to the exchange's collapse last month.
The crypto insurance protocol announced that it expects "to take a loss of around 2,461 Ethereum" (roughly $3 million) due to Orthogonal Trading defaulting on its loans. The two projects were both borrowing from M11 Credit's Wrapped Ethereum (WETH) lending pool built on Maple Finance.
Maple Finance is a lending platform that lets firms like M11 Credit allocate capital and spin up their very own lending facility.
Orthogonal's default was extensive: The majority of its loans, roughly $31 million, were in M11 Credit's USDC pool. The firm also defaulted on another $5 million in M11's WETH pool (the same one that Nexus was also drawing from). These funds were due to the trading firm's direct exposure to FTX.
Nexus first voted to move 15,384 Ethereum into M11 Credit's lending pool back in August, earning 99.09% approval from the community.
The insurance protocol has already initiated the 10-day waiting period to withdraw these funds but it will still suffer some losses.
Nexus said that the losses amount to roughly 1.5% to 2.6% of the project's assets, and will not affect its day-to-day operations.
Nexus Mutual catches a stray bullet
Though defaults on Maple Finance are not entirely uncommon, allegations that Orthogonal Trading misrepresented its exposure to FTX are unusual.
Both Maple and M11 allege that the trading firm misstated its exposure to the collapsed crypto exchange, with Maple noting that "they have been operating while effectively insolvent."
Early on Tuesday morning, the firm explained that it had been "working closely with a potential strategic investor" to help cover its liabilities. "Unfortunately, we were unable to match the timing of any fresh funding with the repayment date of our $10 million loan," the note read.
Orthogonal Trading isn't the only firm to get hit by the FTX contagion.
BlockFi, a popular crypto lending platform, the Winklevoss-led exchange Gemini, and prime broker Genesis are just a few of the big names to either file for bankruptcy or halt operations due to the implosion of Sam Bankman-Fried's crypto empire.