Freeway, a yield strategy platform, has shed some light on its reasoning behind a suspension of services earlier this week.
On Oct. 26, Freeway posted an update explaining why it had taken action. Earlier this week, the DeFi yield platform cited unprecedented volatility in crypto markets and suspended its services.
The firm blamed a failed trading strategy for causing “substantial loss to be incurred due to unexpected market volatility.” It added that the problem was exacerbated by the rallying USD.
That volatility caused a “spike in margin utilization leading to the loss,” according to Freeway.
It added that the specific strategy was used in its beta Earn and Protect product and had stop losses in place.
Freeway recovery plans
The trading loss dramatically impacted Freeway’s portfolio. However, steps were taken to secure the remaining collateral. Freeway did not detail the amounts or assets but the firm said it had already exited the losing strategy.
Freeway is running multiple recovery plans. It also hired third-party advisors to assist. The first plan is to manage and grow existing funds; again no details were provided. The second plan involves diversification, and the third involves “deploying major new funding in a totally new product with impressive projected profitability.”
The plans were very vague with no specifics provided for customers who are now in limbo. Nevertheless, it did warn that things would not be happening quickly.
“In order for us to resume Supercharger buy-backs we need to be in a position to execute safely. We will therefore need to see significant inroads into the losses before that can happen, and that will take time.”
Freeway offers eleven crypto “Supercharger” trading strategies that it claims can earn up to 43% yields. Customers could purchase the strategies with crypto collateral and sell them back to Freeway. However, on Oct. 23 it announced that it was no longer buying them back, sparking speculation of a rug pull.
No recovery for native token
The platform’s native token, FWT, has shown no signs of recovery since the suspension notice. It was trading flat on the day at $0.0015 at the time of writing, according to CoinGecko.
FWT has tanked almost 80% since before the announcement when it was trading at around $0.0070. Furthermore, the battered token is now languishing 95% down from its May 2021 all-time high.