Iron Bank freezes Alpha Homora lending accounts over bad debt dispute

Iron Bank, a protocol-to-protocol DeFi lending platform, froze the lending accounts of fellow DeFi liquidity protocol Alpha Homora over $30 million in bad debt in a move it says is to protect its other depositors.

Iron Bank announced the measure March 1 on Twitter. It said that Alpha Homora failed to top off the collateral for $30 million of bad debt that resulted from a malicious exploit in February 2021.

Alpha Homora has been paying back about $5,000 per month, Iron Bank stated. While those payments have been coming in over the past three months, Iron Bank alleges that Alpha Homora has not maintained an agreement to top off collateral. 

Alpha Homora fires back

Alpha Homora said Thursday that it was caught off-guard by Iron Bank’s actions, accusing it of acting unilaterally and misappropriating user funds.

Alpha Homora said it had been working with Iron Bank to repay the debt, and the project denied reneging on any agreement with Iron Bank to top off the undercollateralized loan.

The DeFi liquidity hub stated that it agreed with Iron Bank to service the debt using 20% of its protocol fees, according to a statement from Tascha Punyaneramitdee, the CEO of the AlphaVentureDAO behind the Alpha Homora protocol.

Punyaneramitdee blamed the current bear market for the declining value of its posted collateral and said Alpha Homora agreed to lock up 50 million ALPHA tokens as collateral, currently worth $6.6 million. 

Alpha Homora urged Iron Bank to reverse the current account freeze and stick to previous agreements reached over the bad debt. Iron Bank did not respond to requests for comment from The Block.