GIP-52: Tugende Response Plan

I definitely support this proposal not only because it will soften the consequences of Tugende case, but because it shows commitment and ultimate belief of the Goldfinch community into the protocol.

The only thing I would like to echo is that this proposal should be an exception. Community Treasury should not be regarded as a safety net to cover substantial losses.

My vote will be “YES” on the snapshot.

I have one question.
Does helping tugende mean that the Community Treasury will help the senior pool even if the same thing happens next time?

@wakiyamap No, it will not. I’m quoting some part of the proposal here: “It is also worth noting that while we believe this is appropriate for this particular situation, we are not proposing that the treasury should be generally viewed as responsible for covering defaults . The community cannot always be viewed as a safety net because that is unsustainable, but in this situation there are substantial resources in the treasury and the community is in a good position to help.”

So, Shouldn’t this proposal also be rejected?
If this proposal is approved, we can expect a guarantee from the Community Treasury if the same thing occurs permanently in the future.
If we want to pass this proposal, I think we should create some kind of standards.

@wakiyamap I don’t think that the Community Treasury should be considered as an anti-default tool. It wasn’t designed for this purpose. However, it’s good to use its help once as said in the proposal.

I support the proposal as it reiterates the commitment of Goldfinch community in reducing losses to LPs as well as creates confidence in prospective investors.

Yes, I support this proposal

@RP2743 If it is as described in the document, the responsibility lies with the borrower and the auditor.

But, GFI staking has not been implemented yet.
So I understand using community treasury for that reason.

However, if we pass this as is, It is also worth noting that **while we believe this is appropriate for this particular situation, we are *not* proposing that the treasury should be generally viewed as responsible for covering defaults** . will be written in the proposal when the next event occurs.

@wakiyamap I don’t think that our community will support an idea to move funds from the Community Treasury next time in case another default happens.

Anyway, once on the snapshot everyone can vote either in favor or against the current proposal.

I don’t think it’s necessary to use all the current USDC in the treasury. I will vote against the proposal

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@obscar it won’t happen! This proposal doesn’t suppose to use all USDC from the Treasury. On the contrary it proposes to do multiple transactions such that there is always $150K remaining in the treasury!
In addition, the community treasury is receiving about $45K per month in fees. Hence, the community treasury will recover quite soon!

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Some thoughts and questions:

For those who are ineligible to participate in being a LP/backer and get yield exposure, the next best thing is to become a GFI token holder. Since fees incurred from withdrawing from pools, accrue to the treasury.

I understand the treasury can be used for anything deemed fit through governance vote. However, in theory most governance token holders would like to somehow be a beneficiary of some treasury funds.

Now these are emerging markets with substantially higher default risk. I may have missed it but what went wrong with the DD for this loan? How many backers underwrote this loan? As I understand it the covenant breach wasn’t just a missed payment but a misappropriation of funds?

I may be misunderstanding but shouldn’t the default exposure be limited to the backers via snapshot of Tugende? I believe this was a backer only deal? Please correct me if I’m mistaken, I think the unitranche/multi tranche updates may have changed the process but should there be some kind of waterfall payment that hits Senior/Junior tranche if funds are used?

I’m late to the show and unsure of what’s been discussed with treasury funds but it seems now (separate thread) is a good time to discuss if USDC in the treasury should be sitting idle moving forward or if it should be deployed strategically in yield bearing vaults?

Considering the restructuring of debt and recovery is expected to be favorable ( who is paying for the restructuring costs?) I feel that if there was a distribution of USDC from the treasury, it should be based on the progress of the recovery. Instead of just a mostly lump sum distribution, maybe quarterly?

Also at the rate of 45k a month, it’ll take nearly ~19 months to recover the treasury balance.

Apologies for the brain dump but wanted to share some thoughts.

No, this was not a backer-only deal, but rather the opposite - all of Tugende’s funds in this pool were transferred from the senior pool with no backers involved in the deal

Hey Seanbutta,
I’ll respond with a few points…

In theory, most governance holders would like to somehow be a beneficiary of some treasury funds

I agree. And in fact, almost all Senior Pool investors are also GFI holders. Basically every Senior Pool investor participated in liquidity mining, meaning they got GFI tokens. So they can vote on this and would benefit from it if it passed.

I believe this was a backer only deal?

No, in fact there were zero backers. This was the only legacy deal in the Senior Pool that did not have Backers. In fact, this deal would have been refinanced out (with Backers) back in 2022 when Cauris was raising, but because that pool never completed, it never happened. So I think a really nice consequence of the $1M injection is that it perfectly matches what would have been the 20% Backer protection

I’m late to the show and unsure of what’s been discussed with treasury funds but it seems now (separate thread) is a good time to discuss if USDC in the treasury should be sitting idle moving forward or if it should be deployed strategically in yield bearing vaults?

Yeah this should be a separate post.

I feel that if there was a distribution of USDC from the treasury, it should be based on the progress of the recovery. Instead of just a mostly lump sum distribution, maybe quarterly?

I’m not sure I understand, why should the payment be based on the progress of the recovery? Whether there is recovery or not, the payment would help all Senior Pool LPs. Plus even if the recovery goes as planned, there would still be a > $1M gap.

Also at the rate of 45k a month, it’ll take nearly ~19 months to recover the treasury balance.

Yes, but the treasury does not really need $1M in it at all times to handle it’s costs. But that’s why the proposal includes some accounting of the general costs for the treasury, and ensures that 1 year of expenses (~$150k) is always available. We will not let the balance dip below this amount.

Hope that helps! Thanks!

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Since this is the first precedent in the 2-year history of Goldfinch, the GIP makes sense to maintain the attractiveness of the protocol’s yield-bearing instruments, even though there isn’t enough data to analyze the likelihood of recurrence.

In a situation where there’s no new precedent significantly impacting LPs (it’s worth noting that there aren’t many counterparties whose borrowings are 100% collateralized by the senior tranche’s liquidity), Goldfinch certainly remains in a favorable position. Therefore, I’ll be voting for Yes.

// Yes.

yes
Good idea. This will generate a positive attitude towards the team from the community.

Yes, I support this proposal

This is the first case of this kind, and we need to approach this issue responsibly.

Although the Proposal states that the Treasury should not be considered as a permanent guarantor in the event of similar situations occurring at any time in the future, this Proposal sets a precedent. And the treasury in the future will still be regarded by interested parties as a possible guarantor.

At a minimum, there are two possible ways to prevent the Treasury from becoming the default guarantor:

  1. The most natural way is through voting in each specific situation;
  2. Another way is to artificially maintain in the treasury an amount equal to ~150k USDC (if more accumulates, spend it on some other purpose or transfer it to some other reserve fund).

If we evaluate the current situation from the point of view of the market (market relations), then the Senior Pool participants were aware (or should have been aware) of the risks that they would have to face. These losses are nothing more than realized risks. And only the participants themselves are responsible for their own losses.

On the other hand, this situation can also be assessed from the standpoint of the Goldfinch community and from the standpoint of “reputational” losses. Senior pool positions are losing their attractiveness. From these positions, the use of the treasury is justified. This will preserve the attractiveness of the Senior Pool, and therefore the project as a whole.

The calculations carried out in the forecast seem to me to be quite correct (adjusted for the possible difference in the timing of debt restructuring and the timing of incoming payments).
I believe that if the Treasury is to be used in this situation, then the payment should be made as quickly as possible and in the maximum possible amounts (i.e., as described in the proposal, 850k + 45k + 45k + 45k + 15k).

I am more inclined to vote “YES” and wish that such situations, if possible, will not be repeated in the future.

In this particular situation, given the other costs, an allocation from the treasury seems appropriate. “Yes”

Council has approved the proposal