I’ve been reading all available documentation and watching the videos in the official Youtube channel of Centrifuge and one particular piece of information that I think it’s important and I can’t find anywhere is what happens when things go wrong, let’s say the asset originator becomes a bad actor. The documentations clearly explains that the pool is managed by a SPV but the legal reaches of the SPV are not clear to me and I think an important document to comprehend this is the “operating agreement” but the link is broken: https://docs.google.com/document/d/14I8x16nRvSVgtnV6EoahZQ9GGVrdvKNbIK7tAN5gBaY/
Is the SPV really legally able to liquidate an asset?
In any case, I think the explanation of what happens when there’s major default by an asset originator should be available, clear and easy to find since I’ve been reading a lot of comments on the Youtube official videos wondering about this and even as criticism because people don’t really understand and begin very confidently to affirm “an NFT isn’t legally bound to an actual house, this is pointless” and stuff like that.
Sure. I would happy to comment. Under the planned arrangements using an Indenture Trustee, the assets of the SPV would be pledged to the Trustee who acts on behalf of the tokenholders. In case of default, the trustee would enforce the pledge, take ownership of the assets and sell them. The proceeds from the sale would then be distributed to the tokenholders. The pledge provides the legal right to the Trustee to take ownership and the terms of the Indenture provide the legal rights of the tokenholders to receive the benefit of the liquidation.
This is a common process in the TradFi world and using Centrifuge protocol does not change the process other than that it will be tokenholders rather than bondholders. There is a more detailed explanation of this process here.