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Crypto lender Goldfinch faces bumpy road after motorbike company defaults on $5m loan

Crypto lender Goldfinch faces bumpy road after motorbike company defaults on $5m loan
African motorbike finance company Tugende defaulted on its loan from Goldfinch, a DeFi protocol that lets businesses borrow crypto using real-world assets as collateral.
  • An African motorbike finance company defaulted on a $5 million crypto loan last month.
  • Lenders, who used the Goldfinch protocol, are now facing a steep cut in their returns.
  • Critics say it’s a lesson in merging blockchain finance with real-world businesses, especially those in emerging markets

Lenders using decentralised finance protocol Goldfinch may face a big hit after a borrower in east Africa defaulted on a $5 million crypto loan.

Goldfinch parent Warbler Labs has accused the borrower, an African motorbike finance company called Tugende Kenya, of making an unauthorised loan to its struggling Uganda-based parent company.

Critics say the situation illuminates the challenge faced by DeFi engineers trying to merge the worlds of blockchain finance and traditional businesses.

The company, Tugende Kenya, helps motorcycle taxi operators in east Africa obtain financing to purchase their own bikes, rather than renting them indefinitely.

In June, it defaulted on its loan from Goldfinch, a DeFi protocol that lets businesses borrow crypto using real-world assets as collateral.

Other investors in Tugende include Toyota’s corporate venture arm and the US Development Finance Corporation.

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The default has forced Warbler Labs to try and recover whatever it can. Warbler says it has hired a “global tier 1 law firm” to pursue assets owned by the Tugende’s Mauritius-based holding company.

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If it has to write off the loan, lenders’ returns will drop from the almost 8% yield they’ve enjoyed over the past year to less than 2%, Warbler estimated.

Goldfinch has about $100 million in active loans, according to data platform, and Tugende is the first borrower to default, Goldfinch co-founder and Chief Technology Officer Blake West told DL News in a statement.

“The amounts outlined in the governance post represent a worst case scenario,” West said. “This is the first loan restructuring of this kind on the Goldfinch platform. Warbler Labs and Goldfinch will keep the community and investors apprised of the recovery efforts.”

Tugende did not respond to a request for comment.


Goldfinch has a $20 million outstanding loan in the US, but otherwise serves businesses in the global South, with outstanding loans in Latin America, Africa, and Southeast Asia.

In 2021, it loaned Tugende Kenya $5 million worth of USDC to finance its expansion, with repayment due in October 2023.

In December, Warbler discovered that Tugende Kenya had loaned almost $2 million to its struggling parent company, in violation of the loan’s terms.

Warbler reported the breach on the Goldfinch governance forum in February, adding that Tugende’s clients “struggled economically, particularly in Uganda, which accounts for the majority of its revenue.”

“The recent rise in fuel costs due to Russia’s invasion of Ukraine, as well as global high inflation, have made it harder for drivers to meet their obligations, leading to an increase in lease cancellations and resulting repossessions.”

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Tugende, Warbler continued, was “eager to work collaboratively with the community to resolve this breach and is already actively taking steps to remedy the situation.”

Then last month, Warbler said the situation was more dire than Tugende had let on.

The loan from Tugende Kenya to its Uganda-based parent company had imperiled the subsidiary, the company’s debt would have to be restructured, and Goldfinch lenders would have to prepare for the worst — “a material write-down, potentially up to the full amount of the principal value of the Goldfinch loan to Tugende.”


Critics called it a rough education in lending to small businesses in developing nations.

“These loans were all very likely underpriced,” Ryan Rodenbaugh, founder of crypto research and development company Wallfacer Labs, told DL News. “[Emerging market] credit is very tough, especially in a broader macro downturn.”

One quirk of the Tugende loan has made the company’s default particularly painful for Goldfinch lenders.

Private credit deals — such as those facilitated by Goldfinch — usually feature two sets of investors: more experienced junior investors who structure the deal and take on outsize risk and reward, and passive senior investors who simply deploy capital.

In the case of the Tugende loan, however, Goldfinch structured the loan, which features only senior investors. There is no group of more sophisticated investors to eat the loss, according to Rodenbaugh.

“Since, for whatever reason, the one deal to default used only senior capital, that basically defeats the whole purpose,” he said.

Collin Erickson, an adviser to real-world asset protocols who formerly worked in traditional finance structuring private credit deals, said issues that arise when lending crypto to real-world businesses can often be traced to a lack of institutional standards.

“In RWA, you have less seasoned players on both sides, the lending and the borrowing, doing pretty complicated financial structuring,” said Erickson, who declined to speak specifically to Goldfinch’s situation.

Part of the reason is that crypto lenders expect outside returns from borrowers who post real-world assets as collateral.

“I consider this the distributed ledger tech risk premium,” Erickson said. “There have been ways that we’ve done things for 50 years in traditional financial services and if you add a novel tech stack that’s not just responsible for transferring value, but also assets in a way that has never been done before, there’s a risk premium for that.”

That draws borrowers who can’t get financing at prevailing rates and who tend to come with greater risk.

What’s next

Warbler has hired a law firm to try and claw back what it can, and has several options.

Warbler Credit Manager Obinna Okwodu told users on Discord that the loan had been partially collateralized by cash, but Tugende has put that money beyond Warbler’s reach by loaning to its struggling parent.

West, the co-founder and CTO, said on Discord that Warbler Labs could liquidate Tugende’s motorbikes.

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Warbler is also considering using the Goldfinch treasury to make lenders whole, CEO and co-founder Michael Sall said during a live question-and-answer session with Goldfinch users.

“Some default rate greater than zero, typically, is going to be expected,” he said. “Obviously we never like to see defaults, but we think there’s still a really compelling path forward for growth for the protocol.”

Totally writing off the loan is a worst-case scenario, Samuel Eyob, Warbler Labs’ chief investment officer, emphasised during the call.

“In actuality, there’s a healthy amount of work that’s going on in regards to actually being able to come to a much better conclusion,” he said, “but some details aren’t ready to be shared yet, given the number of private parties that are being worked on or consulted with.”

West also sounded an optimistic note.

“The story’s not over,” he said. “We haven’t lost 100%, and I think there’s a very real chance we won’t.”