- Inverse Finance has resolved $2.6 million in bad debt, reducing exposure following protocol exploits.
- Outstanding bad debt now stands at $3.4 million, down from the earlier total after securing new funds.
- Funds were raised by selling 104,000 native Inverse tokens to DeFi investors at a fixed rate of 25 Dola per token.
- The protocol’s debts stem from past malicious attacks and a major flash loan exploit linked to Euler Finance.
- The debt clearance coincides with Inverse reaching $100 million in loans on its fixed-rate platform, FiRM.
Inverse Finance, a decentralised finance (DeFi) lending protocol, has secured $2.6 million to cover part of its outstanding bad debt after several previous exploits. The protocol reported the development on Monday, narrowing its remaining bad debt to $3.4 million.
Inverse Finance sold 104,000 of its native Inverse tokens to a group of DeFi investors to raise the funds. Each token was sold at a fixed rate of 25 Dola, the protocol’s dollar-pegged stablecoin, in a private round designed to plug the $2.6 million liability.
Founder Nour Haridy said the sale was necessary to protect the protocol’s finances. “This is our way of sending a message to everyone that Inverse DAO never abandons its users, always repays its debts,” Haridy told DL News, describing the move as “an investment into the future.” The Inverse tokens purchased will be locked for six months; on the day of the deal, they traded at a 72% premium to the price paid by investors.
The current bad debt was caused by exploits in April and June 2022, as well as from the Euler Finance flash loan attack in March 2023. These incidents left the protocol with uncollectable debt, as the value of collateral assets dropped sharply.
Haridy said covering the debt was necessary for stability, stating that failing to do so would have threatened Dola and investor funds. “We had a moral obligation towards people who trusted Dola with their hard-earned money and we chose to fulfill this obligation.”
Inverse Finance plans to address the remaining $3.4 million in bad debt by borrowing funds from another protocol, 40acres.finance. The debt management comes as the platform marked $100 million in loans issued through its fixed-rate lending market, FiRM.
Bad debt in DeFi usually arises when loan collateral loses significant value or is affected by malicious exploits, making recovery difficult. Despite setbacks, Inverse Finance continues operations and manages more than $178 million in investor funds.
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