Babel Finance Pins Hope on New Stablecoin Project to Solve Financial Issues: Report

Babel Finance Pins Hope on New Stablecoin Project to Solve Financial Issues: Report

Babel Finance co-founder Yang Zhou is betting on a new stablecoin to pull the struggling crypto lender out of the financial crisis.

Last June, the Hong Kong-based project was one of three prominent firms to falter, forcing it to halt payouts. The company's proprietary trading desk funneled $766 million worth of customer funds into risky trading activities. The focus now is on repaying the debt.

Repayment of debts

Babel has proposed using the proceeds from a decentralized finance project that mints “Babel Recovery Coins” to repay the debts it owes to creditors. Zhou, who also happens to be the sole director of Babel, believes that this new stablecoin can solve the crypto lender's financial problems.

Yang previously resigned from his leadership position but later resumed it. According to a report from Bloomberg, the project in question is called “Hope,” for which the manager teamed up with some former Babel employees in Hong Kong.

Initially, Hope's eponymous stablecoin will use Bitcoin (BTC) and Ether (ETH) as collateral. According to the website, the new asset will maintain its value near a dollar by arbitrage incentives for traders, unlike popular stablecoins such as USDC, which are fully backed by cash and cash-like assets.

Meanwhile, Zhou is also trying to file a protection moratorium with the Singapore Supreme Court. This would prevent creditors from taking further action against the company for up to six months as it seeks their approval of a restructuring plan.

Who is liable for the losses?

Babel's new project is being touted as a ray of hope, but the report claims that the trading activities of its co-founder Wang Li have contributed to its current state. The filing, seen by Bloomberg, said Li was "responsible" for the losses that occurred due to "risky trading activities" directed solely by management.

As a result, the company is estimated to have lost $524 million worth of Bitcoin, Ether and other crypto assets. Another $224 million was lost when counterparty collateral was liquidated after being unable to meet a large volume of margin calls. Those allegations led Babel to fire Li from his leadership role in December last year.

Just a month before almost succumbing to liquidity pressures, Babel raised $80 million in a Series B funding round led by Circle Ventures, 10T Holdings, Jenerations Capital, BAI Capital and Dragonfly Capital. Asia Pacific family offices also participated in the round, increasing the company's valuation to $2 billion.

.