In today's edition of YIYL, (You Invest, You Lose) we check up on Auros, a trading firm specialising in the shitcoin space. I spoke about this company less than a month ago after they failed to pay back a DEFI loan with Maple DEFI. A very strange situation in my opinion, because they were taking out unsecured loans.
I thought the whole idea of DEFI loans was to take out a small amount of equity from your asset through an overcollateralised loan. Now don't get me started on these loans, even for bitcoin it's risky but for those who borrow against shitcoins, boy you're either a massive risk taker or you are really bad at math.
Even if you're over-collateralised, your shitcoin trades on thin liquidity and it can easily drop below margin requirements. But I am getting off-topic here, back to Auros.
Auros is a market-making firm that trades on various exchanges and defi protocols and looking to actively rip the faces of retail. Yes, trading against retail noobs is pretty easy money when you have the resources and liquidity and business was good, until the great deleveraging exposed everyone's positions and even the exchanges you trade on were short assets.
The merry-go-round of lending and rehypothecation is always a recipe for disaster but when you're chasing profits, you kind of put that risk to the side and ride the waves of capital flow.
Blame it all on FTX
Cryptocurrency trading firm Auros Global, which has got a bad rap for not paying back their DEFI loans are claiming that they could pay it back but boo hoo, they suffered from a $20 million dollar exposure in the FTX collapse.
The firm funds are frozen on FTX, according to the intelligence site OffShoreAlert, which cited a Nov. 16 court filing submitted to the British Virgin Islands High Court.
The company released a statement saying it plans to file for bankruptcy and then resume regular operations after implementing a restructuring plan.
A light liquidation
Auros has opted for a
"A 'light touch' Provisional Liquidation is fundamentally different from a formal, final liquidation/wind-up, and is commonly deployed where businesses are balance sheet solvent, but cash flow insolvent, and where this cash flow insolvency can be quickly and effectively remedied by a corporate restructure," - the company said.
"Upon the successful implementation of the restructuring, it is anticipated that Auros' operations would resume as normal."
The drama runs deep
Auros Global is not the only one in this boat and with FTX being the liquidity provider, trading playground, and investor in a range of companies, the collapse runs deep. A growing list of companies facing challenges in the wake of FTX’s collapse and as the months go by and profits dry up, we should see more of them throw in the towel.
FTX, along with several other companies led by Sam Bankman-Fried, filed for Chapter 11 bankruptcy in November, and im 100% sure several more will follow.
While $20 million is a sizable chunk of change, Auros did owe around $36 million in DEFI loans, so still well far off what they needed to pay to square up their books on this one. Sure that $20 million could make for a decent draw down on their credit and maybe they could service the rest at a new interest rate, I don't know.
What I do know is that partial payments don't always cut it and when various businesses try to skirt around their initial agreements and obligations, someone has to eat the losses.
Sources:
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