Babel Finance misappropriated $280 million in customer funds

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Last Updated on July 31, 2022 by Bitfinsider

According to The Block, citing the crypto company’s restructuring proposal deck, Babel Finance, an embattled crypto lender that froze customer withdrawals in June amid the crypto market crash, lost over $280 million of its customers’ funds in bad trading bets.

According to the proposal, Babel Finance’s losses were caused by proprietary trading of 8,000 bitcoin (BTC) and 56,000 ether (ETH). The failed bets occurred last month, as the platform faced liquidation due to massive deleveraging in the cryptocurrency market.

According to the block, as the price of bitcoin fell from $30,000 to $20,000, unhedged positions “chalk up significant losses, directly leading to the forced liquidation of multiple Trading Accounts.”

These accounts were responsible for the loss of approximately 8k BTC and 56k ETH worth over $280 million.

Babel’s capitulation spiralled as its lending and trading units failed to meet margin calls, leaving the company with no customer funds to honour withdrawals.

Trouble struck not long after the financial services provider raised $80 million in Series B funding in May. Jeneration Capital, BAI Capital, 10T, Circle Ventures, and Dragonfly Capital were among the investors who contributed to the $2 billion valuation.

Due to the market downturn and proprietary trading failure, Babel Finance has been trending alongside other troubled crypto firms such as Voyager Digital and Celsius Network, both of which have filed for bankruptcy.

The collapse of crypto hedge fund Three Arrows Capital (3AC) and the subsequent contagion only added to the uncertainty.

The Babel team is looking to convert $150 million in debt from its largest creditors into convertible bonds as part of its restructuring plans. The lender also plans to add $250 million to $300 million to its survival fund through convertible bonds, with additional funds coming from a $200 million revolving credit facility.

According to the proposal deck, the plan is to eventually include Babel Finance’s major creditors as shareholders.


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Hardware wallets are safe and secure devices that can be used offline. They keep your cryptocurrency offline, making it impossible for you to be hacked. To find out more on the leading hardware wallets, you may view our reviews here: Ledger & Trezor
Disclaimer: The views and opinions expressed by the author, or any people mentioned in this article, are for informational purposes only, and they do not constitute financial, investment, legal, tax or other advice. Investing in or trading cryptocurrency or stocks comes with a risk of financial loss.

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