[Proposal] Archblock Update re: TrueTrading Loan

TrueFi Community,

I’m Ryan Christensen, CEO of Archblock. I’m posting to the TrueFi forum to share updates and perspectives on Archblock and TrueTrading activities related to the TrueFi lending book. Stating the obvious, the crypto lending market has been greatly impacted by the cascading, predominantly CeFi-driven defaults and bankruptcies in 2022. We’ve also seen substantial tightening in the broader lending market that impacts real world asset (“RWA”) opportunities that are core to our strategy.

Archblock continues to pursue full recovery for TrueFi lenders negatively impacted by previously reported defaults from the USDC and BUSD TrueFi pools - Blockwater [loan details + announcement], and Invictus [loan details + announcement]. We cannot share much detail about the proceedings, but we have engaged bankruptcy counsel and will, as shared earlier, expect to distribute 100% of recovered proceeds, net of our external legal fees, back to affected lenders as soon as possible.

More recently, Alameda defaulted on the TrueFi Single Borrower Pool [Alameda II] managed by TrueTrading. We are in direct communication with all of the affected lenders and will be pursuing recovery on their behalf. Similar to the above, we will pass 100% of recovered funds, net of our external legal fees and costs, back to lenders. We are also beginning to explore tokenizing recovery to bring as much transparency as possible to the recovery process & outcomes by bringing them on-chain.

In the NeoFi Opportunities Portfolios, TrueTrading served as a proof-of-concept asset manager, or pilot program, to diversify the reach and capabilities of TrueFi to support new portfolio managers with a variety of businesses representing RWA. To date, these portfolios have created $276,164 in interest for TrueFi lenders. A strong majority of the TrueFi community agreed with this strategy, which is visible in the votes supporting each of the four loans managed by TrueTrading since late 2021 [borrower profile + stkTRU votes]. We continue to believe diversification away from uncollateralized crypto lending into RWA-backed loans are the future of TrueFi. We expect to introduce a handful of high-quality portfolio manager candidates via forum posts and governance votes in Q1. Here’s a recent announcement that highlights an example of our ongoing efforts to create opportunities for new RWA managers.

Our final loan originated by TrueTrading and funded by the TrueFi USDC pool was to be the last loan of TrueFi funds managed by TrueTrading. However, we need to modify this plan, as the sole borrower within the NeoFi Opportunities [Pilot IV] Portfolio, Delt.ai, has yet to identify alternative funding within the current loan timeframe.

Delt.ai has a healthy business providing fintech software and lending to real-world small-to-medium sized Enterprises in emerging markets. Their business depends on durable capital and has counted on TrueFi to be a source of funds for growth as they work to diversify their capital supply.

Their first 3 loans totaling $9,977,500 have generated $276,164 in interest for TrueFi lenders. Our credit team has been monitoring their financials on a weekly basis to ensure they are meeting their covenants, and is actively working with them on new terms with additional lender incentives (more on this below), and firmly believes a refinancing will lead to the best outcome for lenders, with good potential for full repayment including interest. See more about Delt.ai from José de la Luz López, founder & CEO towards the bottom of this post.

Here is a summary of the terms we have agreed on in principle at this time:

  • New loan term of 180 days, from 01/10/23 to 07/09/23
  • New loan interest rate of 14.75% in the first 90 days, and 17.5% in the second 90 days
  • Delt.ai will pay owed interest on the current loan of $166,695, which we intend to airdrop proportionally to lenders via TrueTrading upon receipt of this payment
  • Archblock may negotiate additional benefits, which if available will be passed proportionally to lenders
  • We expect to sign a definitive agreement by 1/9/23, and will update the community should any material changes in this plan occur

As with all other loans that we have addressed in this post, Archblock will pass through 100% of proceeds proportionally to current USDC lenders, either via standard repayment of the loan or settlement if necessary. Archblock will continue to explore tokenizing any recovered off-chain assets for fully-transparent distribution to lenders wherever possible.

For clarity, if the community does not approve the proposed refinancing, the current USDC pool loan to TrueTrading ($5.5MM due 1/24/22) will be called for default on 1/24/22. While Archblock will continue to work with Delt.ai to refinance the loan at the earliest possible opportunity, we believe that a failure to refinance this loan in the near term would impose a greater risk of losses for USDC lenders.

A binding Snapshot vote with the following options has been posted and is live for voting:

  • I support the proposed refinancing plan
  • I do not support the proposed refinancing plan
  • I abstain

In order to enable the recommended refinancing and ensure equitable treatment for current lenders and TRU Stakers, the Archblock and TrueFi teams will work together to prepare an on-chain governance proposal for the disabling of deposits, withdrawals, and stkTRU slashing in the current tfUSDC pool. This proposal will be put forth prior to the current 1/24 loan end date, and will be subject to feedback on this post and via Snapshot vote.

Thank you for your attention and participation in the TrueFi governance process. We will continue to update the community as quickly and transparently as possible as we progress towards our goal of making TrueFi the protocol for global lending.

About Delt.ai
Delt.ai is a fintech startup based in Mexico City that offers an intelligent corporate credit and spend management solution. A Y Combinator company, Delt.ai offers Mexican entrepreneurs better access to working capital through its intelligent credit lines, corporate credit cards, and digital payouts platform. For more information, visit Delt.ai

Archblock Update on Q4 performance of Delt.ai:
Delt.ai continued to perform well in the fourth quarter of 2022 with healthy increases in capital available to deploy to customers despite some slowing and small contraction of capital deployed in December. Recently signed commercial agreements are expected to return capital deployment back to plan in January. Customer delinquencies remained stable at the 6.65% level and well within the base case underwritten levels for potential loan losses. Delt.ai expects that as growth in deployment reaccelerates both volume growth and delinquencies should improve.

6 Likes

Thank you for the excellent post @Ryan.Christensen, and looking forward to a successful refinancing with Delt.ai.

Hello everyone! Thank you @Ryan.Christensen for the proposal and all the work that was put into it.

We’d like to propose an alternative technical solution that could simplify this process.

Instead of pausing withdrawals, deposits and slashing, a flash loan could be used to refinance the loan. The plan would be to submit a new loan request, and to use funds from a flash loan to repay the old loan and then withdraw a new loan in a single transaction.

We believe this is a better alternative as it would remove the need for any major changes or upgrades to the USDC pool.

The plan was already consulted with the AB engineering team. Plan seems to be completely feasible and a proof of concept of a smart contract that would perform the flash loan and the refinancing was already created.

Another advantage of refinancing the loan with a flash loan is that the new loan would need to go through a rating process, so the whole procedure will need to get an explicit approval from token stakers.

In summary, the proposed plan is to:

  • Create a new loan application, on new terms and submit it for rating
  • Rate new loan, as new loans used to be rated
  • Execute funding new loan and repayment of old loan in a single transaction, using a flash loan from other liquidity source (like i.e. Aave)

Potential Benefits:

  • No major changes or upgrades to the USDC pool necessary
  • New loan would go through standard loan rating process, require explicit stkTRU approval

We believe that this is the best way to go forward and work on the issue in the spirit of transparency, decentralization and trustlessness.

Cheers!
Bartek

7 Likes

Thanks for the proposal Bartek, greatly appreciated. This approach sounds substantially cleaner than our original plan. The Archblock team will pursue this and plan to submit the loan request later in January prior to the current loan end date.

1 Like

hello, Ryan
My money is lent to TAM, not delt.ai. because delt doesn’t pay back to TAM, so tam doesn’t pay back to me ? This is unreasonable
I have over a million in the usdc pool and I need more explanation
:disappointed_relieved:
TAM is wholly owned by archblock, so can I assume archblock(tusd) is going bankrupt too?

Hello Tru111,

Thank you for your message and questions about the delt.ai refinancing post. First, Archblock and all of its related entities are viable and solvent. TAM and TrueTrading were created to allow the TrueFi DAO and certain pools created by the DAO, including the TrueFi DAO USDC pool to which you refer, to gain lending exposure to “real world assets” (“RWA”) - companies outside of the crypto lending ecosystem. As a lender in the USDC pool, we would be happy to answer any questions or concerns you may have. Please feel free to use our support@archblock.com email and ask that it be sent to me by indicating that the message is ℅ Bill Wolf so we can discuss this further.

Thank you for your support of the TrueFi protocol and ecosystem.

Best Regards,

Bill Wolf

Archblock Chief Investment Officer

1 Like

Any updates on who is replacing Tobias? And was this a strategic play with Novo?

https://www.linkedin.com/in/tobiascrabtree

Hi SmartDefi,

Apologies for the slow response and thank you for the question. Given current market conditions and our focus at Archblock (and the team working on behalf of the TrueFi DAO) on real world asset opportunities which is what on-chain investors are tell us they are looking for, we don’t anticipate filling any roles on the credit team at Archblock in the near future. We of course miss having Toby on the team and are excited for him in his new role. Nothing strategic about his going to Novo for us here at Archblock right now but we would welcome opportunity to work with them (and Toby again) in the future. Thanks for your continued interest and support for Archblock and the TrueFi ecosystem. Best regards, Bill

1 Like

@SmartDefi Ping me on Telegram, let’s chat–

" Delt.ai will pay owed interest on the current loan of $166,695, which we intend to airdrop proportionally to lenders via TrueTrading upon receipt of this payment"

Hi, any news about that ?

As a lender I feel like we are left in the dark, it would be nice if we had more information.