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Warbler Labs, an underwriter for the decentralized lending platform Goldfinch, has disclosed a significant setback related to a $20 million loan, which could result in potential losses of $7 million. The loan, extended to fintech credit fund Stratos in February 2022, utilized USDC stablecoins and carried an annual interest rate of 11%.
Of the total loan amount, $5 million was directed to REZI, an apartment rental-focused real estate tech company, which has stopped payments and is expected to declare the entire amount as a loss. Additionally, $2 million was allocated to POKT, a digital asset investment initiative that was liquidated, incurring significant losses. Warbler Labs expressed their previous unawareness of this allocation.
Warbler Labs' co-founders, Michael Sall and Blake West, expressed their disappointment and commitment to address the situation. They have decided to absorb the losses associated with both REZI and POKT investments to protect the standing of both Warbler and Stratos.
The loan's challenges highlight the risks of tokenizing tangible assets, such as private credit, in the crypto sector. It raises questions about the thoroughness of evaluations in blockchain-based real-world asset lending methods, given previous instances of loan defaults involving crypto businesses.
Earlier this year, Goldfinch faced another setback when Tugende, an African motorcycle taxi financing company, failed to repay a $5 million loan due this October. This default was exacerbated by Tugende's decision to grant intercompany loans to alleviate a sister company's financial issues.
Users on the Goldfinch governance forum expressed concerns about loan transparency and underwriting challenges, emphasizing the reputational risks involved.
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