Babel lost over $280M trading with customer funds; wants to raise up to $300M
Envato Crypto Render’s Babel Finance lost more than $ 280 million while trading with client-funded The Block report Quoted from the company’s restructuring proposal deck on July 29th.
According to the report, Babel Finance lost about 8,000 Bitcoin (BTC) and 56,000 Ethereum (ETH) in June when it faced forced liquidation of positions due to market downturn.
I read the deck:
“In the volatile week of June, when BTC plummeted from 30,000 to 20,000, unhedged positions [proprietary trading] Accounts caused significant losses and led directly to the forced liquidation of multiple trading accounts, clearing up to 8,000 BTC and up to 56,000 ETH. “
Due to these losses, Babel’s lending and trading department was unable to respond to margin claims from counterparties, the report said. The company’s problems could be due to the failure of its proprietary trading team, the deck said.
Deck further revealed that Babel Finance’s proprietary trading team had free governance and could not hedge the risk. The team has processed multiple trading accounts that are not controlled or monitored by the company’s trading department, Deck showed. In addition, the proprietary trading team had no trading obligations or safeguards against risk and did not report any gains or losses.
The proprietary trading team was also operating in the dark, so buy and sell orders were “because they were not supported by the term sheet. [the] “System”, for each deck. In addition, there is no trading limit for the team, and Babel’s wallet management team has “released an unlimited amount of money” into the trading accounts managed by the team, the report said.
A Babel Finance spokesman told The Block that the company was —
“Working closely with clients, investors, other stakeholders and external advisors during this very difficult time in the industry is the best for all stakeholders to achieve full recovery and maximize value. I believe it is the way. “
Babel Finance has previously been accused of improper use of user funds. Leaked records in October 2020 suggest that Babel was leveraging client funds to boost Bitcoin’s long position and was at risk of default during the Black Thursday market crash in March this year. Did.
At that time, tether Reportedly We rescued the lender by extending the margin call deadline by one month.
Babel’s Action Plan
Babel aims to raise hundreds of millions of dollars in debt and equity investments as part of its plans to save itself.
According to Deck, lenders want to convert $ 150 million in debt from their largest creditors into convertible bonds. Babel also aims to raise $ 250- $ 300 million in convertible bonds and secure a $ 200 million revolving credit line from creditors, the report said. This means that if the plan is implemented, Babel’s largest creditors will be shareholders.
Babel, which stopped withdrawing customer funds last month, raised $ 80 million in a Series B funding round in late May, a few days before financial problems began. At that time, the company was valued at $ 2 billion. Babel also raised $ 40 million in May 2021.
Babel Finance is backed by marquee investors such as Circle Ventures, the venture capital arm of USDCoin issuer Circle, Sequoia Capital China, Tiger Global Management and Dragonfly Capital.
