According to PANews, the decentralized finance protocol Goldfinch has been hit hard after another major borrower, Lend East, defaulted. Lend East had previously secured a loan worth $10.2 million with the support of Goldfinch users. In an update on April 1, Warbler Labs, the company behind the Goldfinch protocol, announced that Lend East could only repay about $4.25 million of the loan and expected Lend East to default on the remaining $5.9 million when the loan matured on April 3. Warbler Labs stated that it is hiring external legal counsel to explore all rights and remedies available to the community to maximize recovery.
This is the third default experienced by Goldfinch protocol users since the operation began in January 2021. Critics say the repeated defaults highlight the difficulty of underwriting loans for emerging markets and expose serious problems with the Goldfinch protocol model. Goldfinch users have stated that the initial credit assessment for the Lend East loan was 'poorly executed,' and both Goldfinch and Lend East have not provided supporters with updates on the loan over the past year.
The report states that Goldfinch does not conduct credit assessments of loans itself, but relies on a dispersed audit team to approve borrowers for protocol consideration. Supporters of the Lend East loan accused auditors of performing poorly in the initial credit assessment of the loan. A user named felix2545 posted in Goldfinch's Discord channel, stating: 'The initial Goldfinch credit assessment was poorly executed, or the assessors were chosen improperly, which ultimately led to multiple defaults on several loans.'