In mid-2022, Babel Finance, a Hong Kong-based crypto lender, restricted withdrawals and redemptions from its platform citing unusual liquidity pressures. Soon after, it was revealed that the lender lost more than $200 million in Bitcoin and Ethereum because it could not meet margin calls.
According to Bloomberg, Babel estimates that an additional $524 million worth of Bitcoin, Ethereum and other tokens were “lost” as a consequence of Co-Founder Wang Li’s trading activities. Thus, the proprietary trading desk reportedly accrued a $766 million order-book deficit.
Another Co-founder and current Director at Babel, Yang Zhou, is reportedly planning to file a “moratorium of protection” to the high court of Singapore. He intends to ask creditors not to take action against the lender for a period of six months. Furthermore, he is also looking to get their approval on a restructuring plan.
Citing a recent filing viewed, Bloomberg reported that the crypto lender has proposed paying back debts to creditors with revenue earned via a new DeFi project. Dubbed “Babel Recovery Coins,” a top executive is banking on a new stablecoin to help sort out its financial crisis.
Also Read: Babel Finance Lost $280 Million in Crypto, Using Customer Funds
Babel’s new ray of ‘hope’
The latest filing reportedly alleges that Co-Founder, Wang Li, was “responsible” for the losses. According to the document, “the risky trading activities appear to have been instructed solely by Wang.” Notably, the executive was sacked from the company’s leadership in December last year. Via a text message to Bloomberg, he acknowledged that he is aware of the court filing. However, he refrained from opining on the same and did not share other details.
Citing unnamed sources, Bloomberg reported,
“Yang — who has resumed leadership of Babel after previously stepping down — plans to build out the DeFi project at the center of the restructuring, called Hope, with a few former Babel employees in Hong Kong.”
The project’s stablecoin will use Bitcoin and Ethereum as collateral at first. According to the website, it would maintain its $1 peg via arbitrage incentives for traders.