Babel Finance Lost $280M Customer Funds In Proprietary Trade

Babel Finance, a prominent crypto lender in Asia, suddenly stopped customers’ withdrawals due to its heavy loss last month. The report said the loss was from proprietary trades it engaged in with the client’s unhedged funds. 

Babel lost 8000 BTC And 56000 ETH To Unhedged Trade In June

Reports showed that the crypto lender firm recently released a proposal deck on recovering the debt. According to the deck, Babel Finance lost about 8k BTC and 56k ETH, estimated to be worth $280 million. 

It happened during the weeks of the extreme crypto market downturn in June when the firm’s proprietary trading positions got liquidated. However, the firm claimed in the deck that its business activities are going smoothly regardless of the debt incurred. 

It emphasized that the failed proprietary trading was outside its regular business schedule. Furthermore, Babel Finance added in the deck that two different teams manage its proprietary trading and the company’s trading. 

The accounts under the proprietary management have no risk controls and no records of profit or loss. The proposal deck further stated that the proprietary teams have no place in the firm’s record sheet. Also, the team receives their trade funds from the company’s main trading team wallet.

Babel First Lost Clients’ Funds In 2020

According to reports, Babel Finance has been in the practice of using clients’ funds for personal trades for a long time. The firm once used clients’ funds to boost its BTC trades which almost resulted in a loss in 2020’s crypto market downturn.

Tether’s timely intervention rescued the crypto lender from folding up due to insolvency, according to reports. The stablecoin added a month to Babel’s margin call deadlines then, which helped the firm to gather more collateral for its loans.

The troubled crypto lender did not disclose nor confirm any information about the restructuring proposal deck. However, Babel Finance’s spokesperson revealed that they are working hand in hand with appropriate quarters as they seek relief from their debt distress. He continued that they are figuring out the best way out of their plight.

The Firm’s Recovery Proposal Deck 

In addition, the crypto firm had drawn out a recovery plan in its restructuring proposal deck. According to its proposal, Babel Finance sets to raise millions of dollars through equity and debt investments.

The first plan was to change the most prominent investors’ fund, which was $150M, to convertible bonds. Following that, it planned to generate about $300M worth of convertible bonds. 

The last aspect was to raise a revolving loan of about $200M from lenders,  meant for restoring its business. Babel Finance’s largest creditors would become shareholders of the firm automatically if the proposal worked out.

Just before the unfavorable events, Babel Finance reportedly raised a whopping $80 million in its $2 billion fundraising rally. However, it is yet uncertain whether the significant financial firm would be able to generate the proposed capital this time around.

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