Babel Finance, one of many crypto lending firms affected by the 2022 bear market, is exploring new restructuring opportunities, including minting new tokens.
Babel co-founder Yang Zhou plans to build a new decentralized finance (DeFi) project to generate revenue to pay off debts owed to creditors, Bloomberg reported on March 5.
Following Yang’s restructuring proposal, the potential DeFi project called Hope aims to mint a new stablecoin to serve as Babel’s “recovery coin.” Unlike major stablecoins like Tether
and USDC, Hope's eponymous stablecoin will reportedly use Bitcoin and Ethereum.
As collateral, the filing notes, it maintains a 1:1 ratio to the U.S. dollar through an arbitrage incentive for traders.
The document also said that Wang Li, another Babel co-founder, was responsible for the losses, and stipulated that “risky trading activities appear to be entirely directed by Wang Li.” In December, Wang resigned as Babel's CEO due to problems at the company. Babel estimates that the firm owes customers as much as $524 million in BTC, ETH and other cryptocurrencies due to alleged losses from Wang’s risky trading activities. A further $224 million was reportedly lost when counterparties liquidated collateral after Babel was unable to meet massive margin calls.
As previously reported, Babel is one of several crypto lenders experiencing severe liquidity issues due to the 2022 crypto winter. The Hong Kong-based company suspended withdrawals and redemptions of its products in June, citing "unusual liquidity pressure". Several prominent industry lenders including Voyager Digital, Celsius Network, Genesis Global and Hodlnaut are facing similar issues. Genesis owes $150 million to its third-largest creditor, Babel, according to a January filing under U.S. Chapter 11 bankruptcy. All of these companies are now trying to put together restructuring plans to pay off creditors and save the business.
In late February, Voyager customers voted in favor of a restructuring plan that would include the acquisition of Voyager’s assets by Binance.US, Binance’s U.S. business.
