Decentralized lending protocol Goldfinch, backed by a16z, announces gradual shutdown

According to a report by Cryptopolitan, the decentralized credit protocol Goldfinch, backed by a16z, has announced it will gradually shut down. Last Friday, an investor using the pseudonym Edward Morra publicly accused the protocol of mismanagement, resulting in losses of over $50 million in user funds, claiming that borrower defaults and failed loan restructurings have made it nearly impossible for depositors to recover their money. The day after this post was published, the project announced it would begin the gradual shutdown process.

The protocol’s native token GFI dropped from its January 2022 peak of $32.94 to below $0.07, a 99.8% decrease, with its market capitalization falling from over $390 million to less than $6 million. Goldfinch was founded in 2021 by a former exchange employee, aiming to connect crypto capital with credit businesses overlooked by traditional banks. a16z led its $25 million financing round in January 2022. Problems began to surface within months after the fundraising: Kenya-based motorcycle financing company Tugende Kenya defaulted; two underlying positions in a $2 billion loan by US credit fund Stratos were nearly wiped out; and Singapore borrower Lend East could only repay 58% of the principal. As the loan portfolio deteriorated, the protocol pivoted to institutional credit funds, but ultimately failed to turn things around.