Goldfinch lending pool suffers third default, Lend East expected to default on $5.9 million

According to Mars Finance news, cryptocurrency lending platform Goldfinch recently suffered a third default. Those affected by this loss are demanding that Goldfinch use the protocol’s $107 million reserve fund to compensate users. Borrower Lend East previously secured a $10.15 million loan through support from Goldfinch users. According to news released on April 1, local time, Warbler Labs, the company behind the Goldfinch protocol, announced that Lend East could only repay about $4.25 million in loans and stated that it expected that Lend East would not be able to repay the remainder when the loan matures on April 3 of US$5.9 million. Warbler Labs is retaining outside legal counsel to explore all rights and remedies available to the community to maximize recovery. Lend East’s incident is the third breach experienced by users of the Goldfinch protocol since it began operations in January 2021.

Critics say the repeated defaults underscore the difficulty of underwriting emerging market loans and expose serious problems with Goldfinch's protocol model. Goldfinch users said initial credit assessments on Lend East loans were "poorly executed" and that neither Goldfinch nor Lend East provided backers with updated information about the loans in the past year. According to the report, Goldfinch does not perform credit assessments on loans itself, but instead relies on a decentralized audit team to approve borrowers for agreement consideration. Supporters of the Lend East loan accused auditors of doing a poor job in the loan's initial credit assessment. User felix2545 posted on the Goldfinch Discord channel: "The initial Goldfinch credit assessment was poorly executed or the assessor was poorly selected, ultimately leading to multiple defaults on multiple loans." (DL News)

Previous news in October 2023, a report from the Goldfinch governance platform stated that a US$20 million lending pool on its platform had bad debts, with an estimated loss of US$7 million. The lending pool provided a 20 million USDC, four-year loan to fintech credit fund Stratos in February 2022, guaranteed at an annual interest rate of 11%, with Warbler Labs as the underwriter. While Stratos’ investment in REZI, a real estate technology company, and digital assets “did not live up to expectations,” Warbler Labs said it would recoup any losses from investors in the lending pool.