Babel Finance Discloses $280 million Trading Losses With Customer Funds
- Crypto lender Babel Finance has recorded a huge loss of $280 million following a proprietary trading failure involving customers’ funds.
- The firm is proposing a restructuring plan that will see it raising hundreds of millions of dollars in debt and equity investments.
Hong Kong-based cryptocurrency lending platform, Babel Finance has joined the list of troubled crypto lenders struggling with liquidity issues as the firm continues to record heavy losses. On Thursday, Babel Finance reportedly lost upto $280 million amid a market crash.
According to a report on Thursday, the crypto lender has recorded a huge loss of $280 million following a proprietary trading failure involving customers’ funds. Due to the liquidity pressures, the firm had recently suspended withdrawals.
Birthed by the recent market crash, the liquidation saw the firm losing upto 8,000 bitcoin (BTC) and 56,000 ether (ETH). Thus, Babel Finance’s liquidity struggles started when the crypto market saw a significant price slump in June, per the report.
” In that volatile week of June when BTC fell precipitously from 30k to 20k, unhedged positions in [proprietary trading] accounts chalked up significant losses, directly leading to forced liquidation of multiple Trading Accounts and wiped out ~8,000 BTC and ~56,000 ETH,” the firm explained.
The report cited that Babel Finance acknowledges the risky nature of its proprietary trading business. However, it did not take caution to hedge its positions. Consequently, putting the funds of its customers at risk. The distressing situation of the firm has hindered its lending and trading departments from meeting up with margin calls from counterparties.
Per the report, Babel Finance had previously found itself in a situation like this as it has reportedly endangered its customers’ funds via failed trading like this. Hence, this is not the first time the firm will be losing customers’ funds. Last year, leaked recordings suggested that the firm had leveraged the funds of some of its users to boost a bitcoin trade. This caused it to face potential default risks following a market crash that happened during the period.
Babel Proposes Restructuring Plan
In a bid to manage the financial woes currently affecting Babel Finance, the firm is proposing a restructuring plan that will see it raising hundreds of millions of dollars in debt and equity investments. The restructuring proposal is aimed at turning the firm’s largest creditors into shareholders.
According to its restructuring proposal deck, the company intends to convert $150 million of the biggest creditors’ debt to convertible bonds. Following plans to raise new capital, Babel’s new move is based on its hope to raise about $250 million to $300 million in convertible bonds. Thereafter, it would secure a revolving credit of $200 million from creditors to help it restore its business operations.
The crypto lender believes that it is expedient to work closely with clients, investors and other stakeholders and external advisors at this point. This appears as the best path they could take to help them recover fully and also hasten its value maximization for all the parties.
Rebecca is a Senior Staff Writer at BitcoinWisdom, working hard to bring you the latest breaking news in the cryptocurrency market. In the words of Elon Musk “Buy stock in several companies that make products & services that *you* believe in. Only sell if you think their products & services are trending worse. Don’t panic when the market does. This will serve you well in the long-term.”
