Home - Regulation - Babel seeks to repay creditors with “recovery coins”: Report

James Carter

March 6, 2023

Babel seeks to repay creditors with “recovery coins”: Report

It has been reported that Babel owes a total of $524 million in Bitcoin, Ether, and other tokens due to the “risky trading operations” of the company’s co-founder, Wang Li.

Babel seeks to repay creditors with “recovery coins”

As one of the cryptocurrency lending companies that was severely impacted by the bear market of 2022, Babel Finance is investigating new possibilities for corporate restructuring that involve the minting of a new token.

According to a report that was published by Bloomberg on March 5th, Yang Zhou, one of the co-founders of Babel, is planning to establish a new decentralized finance (DeFi) project in order to generate revenue in order to repay debts that are owed to creditors. This information comes from the report.

According to Yang’s suggestion for the restructuring of Babel, a potential DeFi project with the working name Hope intends to mint a new stablecoin that will serve as a “recovery coin” for Babel.

According to the filing, Hope’s namesake stablecoin will reportedly use Bitcoin as collateral, maintaining its 1:1 ratio with the United States dollar through arbitrage incentives for traders. Other major stablecoins, such as Tether (USDT) and USD Coin (USDC), use other cryptocurrencies as collateral.

According to the document, another one of Babel’s co-founders, Wang Li, was also to blame for the company’s financial woes because “the risky trading activities appear to have been instructed exclusively by Wang.” In December, as a result of the problems being experienced by the business, Wang resigned from his position as CEO.

Babel has estimated that the business is responsible for compensating customers for losses that were allegedly brought on by Wang’s risky trading activities to the tune of up to $524 million worth of bitcoin, ether, and other tokens. According to reports, Babel’s counterparties terminated collateral, causing the company to suffer an additional loss of $224 million. This occurred after the company was unable to satisfy a high number of margin calls.

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As was previously reported, Babel was one of several cryptocurrency lenders that faced significant liquidity problems in 2022 as a direct result of the winter that cryptocurrency markets experienced. In June, the company with headquarters in Hong Kong decided to halt withdrawals and redemptions from its various products, claiming “unusual liquidity pressures.”

The most prominent financiers in the industry, such as Voyager Digital, Celsius Network, Genesis Global, and Hodlnaut, have all struggled with the same problems. According to a Chapter 11 filing made in January, Genesis owes the company, Babel, which it’s the third largest listed creditor, a total of $150 million. All of these companies are currently putting in a lot of effort to devise reorganizational strategies in order to pay back their debtors and save their businesses.

Customers of Voyager voted in favor of a plan to restructure the company at the end of February. The plan calls for Binance’s United States-based business, Binance.US, to acquire Voyager’s assets.