Babel Finance, one of the many cryptocurrency lending firms rocked by the 2022 bear market, is exploring new restructuring opportunities that involve minting a new token.
The co-founder of Babel, Yang Zhou is planning to build a new decentralized finance (DeFi) project in order to generate income to pay off debts owed to creditors.Bloomberg reported on March 5.
The potential DeFi project, dubbed Hope, aims to mint a new stablecoin to serve as a “recovery coin” for Babel, according to Yang’s restructuring proposal.
Unlike major stablecoins like Tether (USDT) and USD Coin (USDC), Hope’s namesake stablecoin will use Bitcoin (BTC) and Ether (ETH) as collateral, maintaining its 1:1 ratio to the US dollar through incentives. arbitrage for traders, notes the filing.
The document also alleges that another Babel co-founder, Wang Li, was responsible for the losses, stipulating that “the risky trading activities appear to have been directed solely by Wang.” Wang resigned as Babel CEO in December amid the company’s woes.
According to Babel’s estimates, the firm owes its clients up to $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’s counterparties liquidated collateral after the firm was unable to cope with a large volume of margin calls.
As previously reported, Babel was one of several cryptocurrency lenders that experienced severe liquidity problems due to the cryptocurrency winter of 2022.. The Hong Kong-based firm suspended withdrawals and redemptions for its products in June, citing “unusual liquidity pressures.”
Several leading lenders in the industry – including Voyager Digital, Celsius Network, Genesis Global and Hodlnaut – have faced similar problems. Genesis owes $150 million to Babel, its third-largest creditor, according to a document filed in January under Chapter 11 of the law. All of these companies are now struggling to come up with restructuring plans that will allow them to pay off their creditors and save their businesses.
In late February, Voyager clients voted in favor of a restructuring plan that included the acquisition of Voyager assets by US-based company Binance.US.
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