The Inlock platform has successfully completed the first phase of the Recovery and Restructuring Plan, known as the Early Payout. Clients withdrew a total of 431,000 USD in assets. As promised in the program, the payouts did not impact negatively on the proportion of assets in custody in terms of loss, so we can continue to maintain both the swap, as well as the loan closing functions with the sale of collateral.
At the time of the suspension’s notification, it was appropriate and necessary to communicate the extent of the damage. However, this is not a static value as the exchange rates are constantly changing, and on the other hand, our clients also rearrange the portfolio of their assets held on the platform from time to time using the swap function. However, we often receive feedback where clients consider the initially reported dollar loss ratio as a kind of fixed data. The following paragraphs explain the questions that are essential for our clients to understand the details of the current situation and to be able to evaluate their own position.
The Inlock platform provides access to a very broad range of crypto assets. Depending on the client’s allocation rate, it can change significantly within days – thanks to the swap function or as a result of loan repayments or even liquidation from collateral.
In the past weeks, the platform’s first priority has been to isolate the damage. With the recalled loans, we have already achieved a situation where over 60% of the assets under management (AUM) of the platform consists of assets held in the Savings Accounts, with the remaining proportion consisting of collateral assets for loans that are currently pending. Since all new loan funding within the platform has been suspended, even to institutional partners, this ratio will continue to increase. All ongoing institutional loans will be returned by the last week of January 2023 at the latest, when only long-term in-platform loans will remain open, but their collateral ratio is not expected to exceed 8-10% of the total AUM.
It is important to note that the occurring damage is not homogeneous. As previously reported, most of the damage was in stablecoin, with a smaller part in a mix of bitcoin and ethereum. Of course, there are also several coins/tokens on the other side, of which we have more in each unit than the customer exposure due to the previous profitable business practice. There are currencies where the platform holds 110% of the clients’ assets, but also currencies where this is less than 50% due to the damage.
It is crucial to emphasize that the current loss ratio of the weighted asset value is at 17%, which in itself can be a valuable indicator for our clients, but it does not predict that the ratio will not be halved or even doubled with a change in the exchange rate and allocation ratio.
We are in the process of developing a transparent, near-real-time reporting mechanism to efficiently track the size and composition of losses compared to the total client assets under management. The report will also serve as a “Proof of Reserve”, allowing our clients to monitor the impact of the recovery and restructuring process on the total AUM in detail, enabling them to make more effective decisions on options to be offered in the future.
We also strive to ensure that all plans or options are developed on fair and mutually beneficial terms. Accordingly, we will do our utmost to protect the interests of any client from choices that disadvantage those who don’t or can’t take advantage of the same opportunity. The team is doing so in a way that goes far beyond its obligations under the platform’s terms of use, even in case of vis maior event.
To implement all these initiatives, we ask for the trust, patience and support of our clients. At the same time, we reaffirm the point of the statement of 14 November 2022:
The Inlock team is confident and determined to find a solution to the current situation. In the spirit of transparency, it will be implemented fully with the involvement of customers, thereby distancing ourselves from the high-risk activities that essentially caused most of the damage events in the crypto market in the past six months.