In an effort to repay $766 million to creditors after recording massive losses last year, Babel Finance proposed developing a new stablecoin. By using earnings from the project, “Babel Recovery Coins” will be created.
In a filing, Babel Finance’s proposal was outlined, and its head Yang declined to provide further details. During the slump in the bitcoin market last year, Babel experienced financial troubles.
The company’s financial crisis, which was made public when withdrawals were stopped last year, can be resolved with the help of the new stablecoin, according to Yang Zhou. Babel’s now-single director Zhou plans to petition the Singapore High Court for a moratorium of protection, asking that creditors wait from taking any action against the business for six months as it works to get a restructuring plan approved.
The startup’s issues stemmed from its proprietary trading desk misusing customer funds and accruing a $766 million order-book deficit. The filing claims that Wang Li, who was removed as Babel’s leader in December, is responsible for the losses. It claims that Wang appears to have been solely responsible for the risky trading activities.
Wang’s trading activities resulted in losses totaling $524 million in bitcoin (BTC), ether (ETH), and other digital assets owned by the company and its clients, according to Babel. Because the company was unable to meet many margin calls, counterparties liquidated collateral, resulting in $224 million in additional losses.
The crypto lending firm Babel has restructured
Babel, a major Asian crypto lending firm, is restructuring under Yang, who has returned to the company after stepping down. The restructuring is centered on a DeFi project that will launch Hope, a stablecoin. Initially, the stablecoin will be backed by bitcoin and ether as collateral, incentivizing traders to keep its value close to a dollar through arbitrage.
Hope, unlike popular stablecoins like USDC, will not be entirely backed by cash and cash-equivalent assets. The restructuring is being advised by Kirkland & Ellis and Carey Olsen. Babel, which was founded in 2018, was valued at $2 billion after raising $80 million in funding in May of last year. However, the firm and other digital-asset lenders suffered significant losses during last year’s crypto market downturn.
Leading lenders such as Voyager Digital Ltd., Celsius Network, and Genesis Global have declared bankruptcy. According to a January Chapter 11 filing, Genesis owes $150 million to Babel, its third-largest creditor.