Babel Finance explores new restructuring opportunities with DeFi project

Terrill Dicki   Mar 07, 2023 09:00

Babel Finance, one of many cryptocurrency lending firms that suffered losses during the cryptocurrency winter of 2022, is exploring new restructuring opportunities to pay back its creditors. The Hong Kong-based firm has announced plans to build a new decentralized finance (DeFi) project called Hope, which aims to generate revenue to repay the company's debts.

According to reports, Hope will mint a new stablecoin that will be used as a "recovery coin" for Babel. Unlike major stablecoins like Tether (USDT) and USD Coin (USDC), Hope's namesake stablecoin will reportedly use Bitcoin (BTC) and Ether (ETH) as collateral, maintaining its 1:1 ratio with the U.S. dollar through arbitrage incentives for traders

Babel co-founder Yang Zhou is leading the restructuring efforts, and has accused another co-founder, Wang Li, of being responsible for the company's losses. The company estimates that it owes customers as much as $524 million worth of BTC, ETH and other cryptocurrencies due to losses allegedly caused by Wang's risky trading activities. Another $224 million was reportedly lost when Babel counterparties liquidated collateral after the firm could not meet a large volume of margin calls.

Babel's liquidity issues are not unique, with several prominent industry lenders facing similar challenges. Voyager Digital, Celsius Network, Genesis Global and Hodlnaut are among those that have experienced serious liquidity issues due to the cryptocurrency winter in 2022. Genesis owes $150 million to Babel, its third-biggest named creditor, according to a January Chapter 11 filing.

In late February, Voyager customers voted for a restructuring plan that included Binance's United States-based business, Binance.US, acquiring Voyager's assets. Babel's restructuring plans involve Hope, which will generate revenue to repay the company's debts. Yang Zhou hopes that this project will help to save the company and restore its reputation in the cryptocurrency lending space.

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