Troubled Asian crypto lender
Babel Finance suffered heavy losses due to proprietary trading with customer funds, its restructuring proposal shows.
The proposal deck reveals that Babel Finance lost more than $280 million in bitcoin (BTC) and ether (ETH) due to its proprietary trading failure.
Specifically, it lost around 8,000 BTC and 56,000 ETH in June after facing liquidation due to a significant market downturn.
Due to these massive losses, Babel’s lending and trading departments were unable to meet margin calls from counterparties.
Babel Finance describes its proprietary trading business as a “risky” business yet it failed to hedge its positions.
This is not the first time Babel Finance has reportedly played with customers’ funds. In October 2020, leaked recordings suggested that the firm leveraged some user funds to boost a bitcoin trade and faced potential default risks during that year’s Black Thursday market crash.
At the time, Tether reportedly stepped in to save Babel Finance, per the recordings.
As part of its rescue plan, Babel now seeks to raise hundreds of millions of dollars in debt and equity investments.
First, it seeks to convert $150 million of the biggest creditors’ debt to convertible bonds.
Additionally, it looks to raise $250 million to $300 million in convertible bonds and then secure a revolving credit of $200 million from creditors “for business restoration.”
The plan, if successful, would turn Babel’s largest creditors into shareholders.