Update on Lend East Pool

Authors: @mikesall and @blakewest

Dear Goldfinch Community,

We want to provide an urgent update on the Lend East pool.

At approximately 2:45 pm ET today, Karan Bhatia, CEO of Lend East, informed Warbler Labs via a call that Lend East expects to be able to repay only ~$4.25m of its $10.15m Goldfinch pool. This implies a loss of approximately 58% of the principal, which would impact both Backers and the Senior Pool. This loss is inconsistent with, and much higher than, all prior communications that Lend East has made to the Goldfinch Community.

As a reminder, Lend East has a $10.15m Goldfinch pool, which matures on April 3, 2024. Lend East previously identified two key issues with its pool. The first issue relates to Oriente (15% of Lend East’s pool), which defaulted on its loan from Lend East. The Oriente situation was communicated to the Goldfinch Community on January 3, 2023. The second issue relates to an unauthorized intercompany loan to another Lend East entity (~7% of Goldfinch’s Lend East pool). Assuming there was no recovery from Oriente and the unauthorized intercompany loan, that would have been a loss of ~22% in the worst case scenario.

Today’s update from Karan is significantly worse than what he has previously conveyed to Backers in the Lend East pool, as well as the broader Goldfinch Community. We are still trying to gather information regarding the reason for this significant shortfall.

Warbler Labs is engaging external counsel to explore all rights and remedies that are available to the community to maximize recovery.

Thanks Mike for sharing the update.

This is extremely disappointing. I’ll reiterate what has been shared on Discord by different community members.

What we understand is the following:

  1. Initial Goldfinch credit assessment has been poorly executed (or assessor poorly selected) as we end up with multiple default on multiple loans
  2. in the case of LendEast, Goldfinch has been the nice borrower that you can take advantage of, with $750k of Goldfinch money used to repay other borrowers in pure breach of the agreement (and of fiduciary duty)
  3. in the case of LendEast, Goldfinch has been either lied to or didn’t perform enough reporting/follow-up to get actual updates from LeadEast

That means that in the case of LendEast we have what looks like at least 3 fails or gross negligence from Goldfinch team.

Given current GFI price, Goldfinch is in a more than comfortable position to use a small share of the treasury to buy the senior pool and backer claims on any future recovered funds. That also leaves time for the protocol to “explore the rights and remedies” (in particular related to point 2, which seems borderline fraud from LendEast) without the backers being held hostage in a lengthy recovery process, further degrading the trust of lenders / liquidity providers into Goldfinch’s ability to curate private debt deals and monitor a portfolio of investments.

Given the numerous irregularities mentioned above, I would thus highly suggest:

  • that Warbler contributes what Warbler is financially able to contribute (let’s assume Warbler is able to compensate the USD2m of backers)
  • using the protocol treasury (currently standing at USD112m in GFI and USDC) as working capital to repay the delta (up to USD5.9m, but USD3.9m if Warbler contributes) on the LendEast pool senior backers (and junior backers if not already taken care of by Warbler). That might mean performing some swap from treasury assets to USDC
  • pursue a court process against LendEast to collect those missing USD5.9m. Even if, despite clear fraud from LendEast, Goldfinch does not collect anything, and assuming Warbler has committed zero, the impact on the protocol treasury would only be maximum 5.4%

This would be highly beneficial (i) to early backers, who have locked capital from day zero, with little impact on the overall protocol treasury, and would (ii) avoid generating an intense amount of FUD that thus avoids a significant negative impact on token price medium term.

Without committing to a systemic bailout of all future pools, the LendEast pool shares common points with the Stratos pool (i.e. borrowed funds have not been used as they should have been) and Tugende pool (the Treasury is in a good enough situation to afford to provide such working capital - the treasury has been in such a good financial health) that both have benefited from the support of the protocol. And given that the protocol wouldn’t exist without lenders, it makes sense to support them as long as (i) the protocol treasury can afford (ii) there is clear responsibility from the protocol


Thanks @Herve for articulating a solution that would preserve the best interest of the community all round. I am rooting for this.

Goldfinch and Warbler failed on the due diligence and the investment follow up, and Warbler using its treasury to bail out backer only seems like the right thing to do. It will be easy enough to get the consent from each and every backer to surrender their claim on LendEast to the benefit of Warbler, and let Warbler handle the legal action.

The team at Goldfinch is also in a favorable position to cover additional loss in the senior pool, which is a fraction of the treasury. The protocol won’t find any traction without users to invest in its RWAs, and avoiding losses to users will eventually benefit everyone involved.

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Hi everyone,

In connection with the Lend East events of default, our team continued to discuss with both our U.S. and Singapore legal counsel throughout the past week regarding potential remedies that may exercised against the borrower.

As you are aware, since the loan documents for Goldfinch-tokenized loan portfolios such as Lend East did not include Warbler Labs as lender or administrative agent, our ability to intervene is limited. That being said, we have received requests from a few affected members of our community to appoint Warbler Labs as their administrative agent so we can act on their behalf in situations as this. To the extent this is something you want us to do for you, please contact us at credit@warblerlabs.com.

We have been asking borrowers, including Lend East, to directly communicate with the community and maintain the highest standard of transparency. In the meantime, we cannot emphasize enough the fact that you, as lenders, have rights against borrowers such as Lend East, as stipulated in the loan documents. You may also consult with your counsel and advisor for help on navigating events of default as these. At a minimum, we encourage you to maintain an open dialogue with your borrowers, especially Lend East.

In addition, we saw some people suggested that the Goldfinch community allocate its GFI holdings toward losses. (Including suggestions from those above in this thread). We haven’t yet formed a view about this at Warbler Labs, but it’s important to note that any decisions around this are ultimately up to the community, and Warbler Labs has never voted on a community proposal.

As we mentioned last week, we recognize the gravity of these situations, which are evolving as we speak, and plan to report back by mid-month with another update.

Thank you for your patience.

Warbler Team

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Dear Mike,

Thank you for keeping us updated, yet there are critical concerns that necessitate a deeper examination, specifically regarding the approach you’ve chosen for this issue, in contrast to your proactive involvement in Tugende and Stratos projects.

A point of major concern is the apparent lack of action from Warbler, particularly when compared to the swift response you orchestrated for Stratos. The community has been vocal about Warbler’s shortcomings in selection, monitoring, and communication, yet these issues remain unaddressed. This silence is particularly troubling and contrasts sharply with the expectation for Warbler to intervene as it has in past crises.

Furthermore, the community’s unanimous preference, as seen in here and most Discord discussions, leans towards resolving the ongoing crisis with treasury funds. This collective stance underscores a strong desire for the protocol to own up to and address the repercussions of this debacle, a sentiment that seems to be overlooked.Your advisory for borrowers to liaise directly with LeadEast is also concerning, especially given LeadEast’s track record of neglecting lenders’ inquiries. This guidance seems insincere, considering the context. Adopting a stance that the outcome is “up to the community,” but taking a stance against community view (i.e. doing nothing vs. community asking Warbler to take responsibility) does not seem entirely forthright.

Finally, the stark contrast in the financial outcomes for token holders, the team, and Warbler, benefiting from the appreciation of GFI price, against the backdrop of significant or total losses suffered by the actual users of the protocol, is distressing. It challenges the ethical stance of prioritizing speculative interests over user welfare and underscores the importance of adhering to a fiduciary duty towards your users, rather than shifting responsibility onto the community or LeadEast.

As a GFI token holder and a Goldfinch / LeadEast investor, I feel the inability of Warbler to step up for a resolution and the feeling that Warbler has been cherry-picking winners (Stratos backers vs. LendEast backers for instance) put me in a very uncomfy situation. I wouldn’t recommend anyone to trust their money with Goldfinch further, but at the same time that would probably mean the token will converge to zero in the medium term. Alienating users has never been a successful business case for any crypto protocol.


Hi Mike,

I’d like to share a feedback on this last update:
· “since the loan documents for Goldfinch-tokenized loan portfolios such as Lend East did not include Warbler Labs as lender or administrative agent, our ability to intervene is limited” => While this stands correct in the contract, it will be hard to argue Warbler Labs did not act de facto as an administrative agent. As of today the lenders still haven’t had any contact whatsoever with LendEast, not even communication on the state of default of the loan, and not to mention communication on the state of the bankruptcy procedure going on with Oriente. Starting your update by mentioning that Warbler Labs is not legally involved in this matter really just goes to show that lender’s interest is not the priority here. Stating further that we are “encouraged to maintain an open dialogue with […] Lend East” is straight up fallacious, as it is all we have been asking for since one year, while being completely ignored by Goldfinch, Warbler Labs and Lend East.

· “Some people suggested that the Goldfinch community allocate its GFI holdings toward losses” => You forget to mention that some members support the idea that Warbler Labs takes responsibility for a share of the loss using its own treasury, not Goldfinch’s, as there has been gross negligence in the underwriting of Lend East and management of the credit. While I agree Goldfinch should use a small fraction of its treasury to cover the loss, mostly Warbler Labs should come forward and use its own allocation of GFI to bail out backers, while getting the possibility to make up for that bail out once the legal action against Lend East bears fruits.

· “Warbler Labs has never voted on a community proposal” => Not voting on a GFI allocation to cover the loss would be some high form of hypocrisy, as we know treasury allocation proposals only ever get though when they are upvoted precisely by the team in charge of the project. Not voting equals to voluntarily turning this situation into a governance masquerade, where only the actual users and early supporters of Goldfinch have to lose.

finally, I calling on the team to weight the [currently infinitesimal] cost of covering protocol users’ loss vs. moving on with rekt users and records. This case should be dealt with in a similar fashion than that of Stratos earlier. Do the right thing.


Btw I am not sure it has been mentioned yet but Warbler got 4.4% of all GFI tokens, i.e. around $22m at today’s valuation. This does not take into account the team’s share of 28.4% i.e. around $95m at today’s token price, and which is a separate bucket. Even if this is not fully vested, not mentioning Warbler’s responsibility and financial capacity is a VERY convenient thing for the team.

Goldfinch truly decentralized private credit (losses) but is keeping its own centralized balance sheet very safe.


Hi everyone,

Over the last week, we, in our capacity as administrative agent for several Backers, have made several requests for additional information regarding the Lend East portfolio but have not received any information. Lend East and Mr. Karan Bhatia’s continued lack of transparency on this matter is extremely concerning, and does not meet our community standard.

With respect to the Notice of Default and Notice of Redemption we sent to Lend East and Mr. Karan Bhatia on April 4, 2024 via email (and subsequently a physical copy on April 9, 2024), we still have not received a response. On April 19, 2024, we delivered another letter to Lend East and Mr. Karan Bhatia to notify them of additional events of default and demand prompt and full payment.

As mentioned in our recent update, please regularly visit the data room set up by Lend East to avoid missing critical information, including but not limited to Lend East’s proposal to pay $4.25 million (the “Settlement Amount”) by May 10, 2024, in which letter the company also threatened to file for insolvency. The letter provided instructions to contact legalenquiries@lendeast.com for any questions. Please review this letter and be sure to contact the email address provided therein (legalenquiries@lendeast.com) and continue to remain in close, direct communication with Lend East and Mr. Karan Bhatia (karan@lendeast.com) during this period.

As administrative agent, we have been actively exploring all possible civil and/or criminal options against Lend East, Mr. Karan Bhatia, and their respective affiliates with our U.S. and non-U.S. legal counsel.

We are also contemplating a potential community proposal to set aside public funds and long-term resources to retain legal and non-legal experts to formally lead a potential litigation and restructuring process. As soon as we get final sign off from our legal counsel and advisor on this plan, we will promptly share with everyone.

As mentioned in our prior updates, if you want to appoint us as your administrative agent, please reach out to credit@warblerlabs.com We will continue to share updates here as the situation evolves, with our next update being in the next two weeks.

Best regards,

Warbler Team

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Hi @mikesall, @blakewest

I think it’s challenging for the community to take a position regarding LendEast if all the information is not shared properly.

Could you share in this governance forum (or through a private call with the backers), the following information:

  • what is Warbler’s strategy to sue LendEast
  • what is your understanding of why LendEast used USD750k to repay other LPs, as alledged in your post. It’s quite unheard of in any institutional fund and we’d like to understand how this was technically possible. Can you explain if there are specificities in the legal structure set up for Goldfinch investors that made LendEast behaviour possible?
  • what is your understanding of the actual performance of the NAV of LendEast given that (i) only one company has been identified as poorly performing (Orience) and (ii) this particular company has eventually found a new buyer recently?

We are asked to take a 60% haircut without any clear information about what is happening. I think it would be unfair for the community to be asked to take any decision without this information communicated to the best of your knowledge.

For Stratos you decided to backstop the whole thing so that the community did not have to dig into the details, but given that here you seem to be reluctant to do so, it would be fair to give us as much details as possible so that each community member can do an informed decision

I hope you will not ghost the community and will communicate transparently with the community on those points.

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Hey @Herve, absolutely. We are incorporating these questions into our May 3rd update.

Hi everyone,

First of all, our apologies for this late notice. We tried to incorporate additional information and the latest findings from our legal counsel, and missed the deadline to post.

Like many of you, we have also failed to get Lend East and Mr. Karan Bhatia to respond to our questions. Lend East and Mr. Karan Bhatia’s uncooperative behavior, including the continued lack of portfolio transparency, is unprecedented. We understand the severity of the situation, and have been doing our best in our capacity to help.

With respect to @Herve’s questions from last week, our current understanding is as follows:

  • Question: What is Warbler’s strategy to sue Lend East?

    Answer: We are waiting for further analysis from both U.S. and non-U.S. legal counsel. As soon as we have clarity on this, we will share. All possible civil and/or criminal options against Mr. Karan Bhatia, Lend East, and their respective affiliates are currently on the table.

  • Question: What is your understanding of why Lend East used USD 750,000 to repay other LPs?

    Answer: We do not know why. Mr. Karan Bhatia has not provided the rationale for such behavior.

  • Question: Can you explain if there are specificities in the legal structure set up for Goldfinch investors that made Lend East behavior possible?

    Answer: Such behavior is not permitted in the documents which you, as lender, executed with Lend East, as borrower. This was why Lend East was presented with multiple notices of default.

  • What is your understanding of the actual performance of the NAV of Lend East?

    Answer: We do not know the NAV of the Lend East portfolio.

Notwithstanding such conduct exhibited by Mr. Karan Bhatia with respect to portfolio transparency, we have noted that Mr. Karan Bhatia still posts to the data room. As previously mentioned, please regularly visit this data room to avoid missing critical information. Additionally, we continue to urge all affected community members to remain in close, direct communication with Lend East (legalenquiries@lendeast.com) and Mr. Karan Bhatia (karan@lendeast.com).

Separately, we have started interviewing advisory firms and consultants whom the Goldfinch Foundation may retain to oversee risk management across the entire portfolio, including but not limited to the Lend East case, going forward. Such advisor would be able to represent all Backers and Senior Pool participants and hold all currently outstanding borrowers, including Lend East, accountable for their obligations to their respective lenders. We will follow up on this community-retained advisor role shortly.

Best regards,

Warbler Labs Team

Hi @mikesall I reviewed the DataRoom shared by LendEast, and LendEast is saying in writing that they communicated to Goldfinch team that in Oct 2023 they requested an extension of the Maturity Date, and that Goldfinch rejected this.

Did you indeed receive this communication from LendEast?
If yes, did you decide to reject it without asking the lenders what they wanted to do? (and without even informing them about it)

Sorry to ask questions, but what transpires is that Goldfinch took decisions on behalf of the lenders about how to manage this facility, without informing them. Is that even legal?

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Hi everyone,

We understand that many of you have not been able to get detailed updates from Lend East; neither have we. Some of you have also reached out to Mr. Karan Bhatia but have not been able to get a direct response; neither have we. Like you, we, too, have been kept in the dark. We believe, however, that despite being overdue on its repayment of the Debenture and currently having $4.25 million at hand, Lend East has decided to wrongfully withhold such “presently available” funds in order to extract a settlement and concessions from the Goldfinch community, instead of making a partial repayment.

We have also noted several other questions from the community and will address them as follows:

  • Has Lend East actually lost the money or is it more likely that Lend East is only retaining it until Jan 2025?

    Answer: Unfortunately, we do not know. The information in the data room and direct confirmation with Lend East’s portfolio companies suggests that other positions (excluding Oriente) have been performing and a significant amount of the fund is still outstanding, so we also do not believe this is a liquidity or last-investor-out scenario. Instead, the settlement proposal to pool participants likely represents an outsized loss relative to Lend East’s other fund participants. Warbler is currently working as an agent to push the situation to a more favorable resolution.

  • What is the strategy of Warbler to sue Lend East

    Answer: This was addressed in the prior message Update on Lend East Pool - #11 by mikesall

  • Did they pay other LPs?

    Answer: While this has not been directly confirmed, we believe that some other investors have been repaid, as many underlying exposures have matured. We also believe that there are several facilities outstanding, so we can infer that not all investors have been able to exit.

  • Did they just embezzle fund?

    Answer: We currently do not know if Mr. Karan Bhatia or Lend East have embezzled funds.

  • Did they actually have $6m losses with their underlying companies?

    Answer: We do not know. We know that Lend East had $5.25 million exposure to Oriente (out of ~$35 million) and that position has been almost entirely written down. Otherwise, we have not been made aware of defaults among underlying portfolio companies.

With respect to claims being made about Warbler Labs negotiating an extension to the maturity date back in October 2023, that is factually incorrect. Warbler was never party to such discussion, nor did Warbler Labs have the authority to make such a decision under the terms of the legal agreements. We take these false claims very seriously and are committed to protecting our reputation and integrity.

Lastly, we are working on a separate proposal we will share soon for the community to retain an advisor to help oversee risk management. This should help significantly with communications as well. In the meantime, we may not be able to respond as promptly to all questions while we work on getting this proposal set up.

Hi Mike,

We have seen that LendEast has explained that the reason for their default was the rejection by Goldfinch of a negotiated offer back in FY23.

Your team has however stated in Discord that LendEast has never contacted Warbler team, but to make sure we are aligned, can you clarify whether LendEast has ever contacted any team member from Goldfinch about this topic?

Obviously it cannot be both, so one is lying

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