Bitcoin (BTC)-backed lending company Lava recently claimed to have saved its users “millions in interest costs” by refinancing their loans to interest rates as low as “7% all-in for a full year.”

To several critics who have questioned the company over the past few weeks, that claim was the straw that broke the camel’s back.

Jack Mallers of Strike, a BTC-backed competitor of Lava, published a spreadsheet to debunk the claim.

In response to a customer request to match Lava’s advertised 5% rate after Strike announced a 9.5% rate for BTC-backed loans, Mallers explained the difference between the two lenders.

First, he called Lava “not a regulated financial institution,” unlike Strike which has money transmitter licenses (MTLs) in the vast majority of US states.

In contrast, Lava has no MTL in any US state.

Mallers also questioned Lava founder Shehzan Maredia “aiming” to have “7% all-in” interest rates for its BTC-backed loans. 

“What is your actual pricing?” Mallers asked, in an attempt to decipher reality from future guidance.

Lava fails to answer one big question

Mallers also detailed the official interest rates of Strike versus Lava. At the end of the first month, Strike maintains a 10% effective APR versus 35.2% at Lava. 

Needless to say, 35.2% is quite a bit higher than Maredia’s “aiming” to have “7% all-in” interest rates.

Specifically, Lava offers users a 5% two-week promotional rate, a 7% post-promotional rate, plus a 2% capital charge. In sum, the annualized interest rate for a Lava user after one month is 35.2% by Mallers’ calculation — far above Maredia’s 7% “aiming.”

In fact, Mallers found that the effective interest rate for a $750,000 BTC-backed Lava loan wouldn’t fall below Strike’s 10% rate until a user held for longer than nine months.

Returning to the original claim, Maredia tweeted that it’s somehow saved users “millions in interest costs” despite only launching its loan product within the past few weeks.

Given that its one-month effective APR seems to be higher than 35%, the simple math of this claim is difficult to believe.

Indeed, Maredia’s “aim” to have “7% all-in” interest rates for its BTC-backed loans doesn’t seem to answer one simple, mathematical question:

How has Lava saved its users “millions in interest costs” within a few weeks by refinancing them at annualized rates that could exceed 35%?

Read more: Bud to Bitcoin: How Strike’s Jack Mallers stumbled from cannabis to crypto

On social media, critics have asked Maredia to explain the disconnect between his 7% “aim” and the actual rate that Lava users are paying by the end of their first month.

Maredia has declined to back down on his guidance.

Protos has reached out to Lava for comment and will update this piece if and when we receive a reply.

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