Babel traded $280 million in user crypto, lost it all

Mobile phone with Babel Finance crypto company website on screen in front of company logo

Photo: T. Schneider (Shutterstock)

Babel Finance, the Hong Kong-based crypto lender, apparently had other designs when its global userbase handed over its crypto to the company than just borrowing and lending. He seems to have done what everyone else does with crypto, speculating fast and trying to push the “line” up. Of course, that all changed when the line no longer rose.

The block reported based on restructuring proposal documents that Babel Finance lost 8,000 bitcoin and 56,000 ether in June, worth almost $280 million, although of course the price is constantly fluctuating. The company had apparently conducted proprietary trades with client funds. It is unclear based on the reports if users knew/knew their crypto was/is being used in this way. The company released no official statement on the issue and did not immediately respond to Gizmodo’s request for comment via the company’s primary email.

The documents were reportedly dated July, but they detail the company’s losses last month when it was liquidated due to the crypto bear market in June. According to the report, Bitcoin’s fall to $20,000 “resulted in significant losses” leading to several trading accounts being liquidated, taking thousands of crypto with it. Last month, the company interrupted withdrawals on its platform, around the same time, it all went down, describing “major swings” in the market.

The restructuring proposal Deck further described a “single point of failure” with their ownership negotiation team, essentially throwing the workers under the bus for operating “outside of normal, otherwise well-run business.” However, the company’s attempts to speculate in the crypto market have failed significantly with the general market downturn. The company apparently did not think to hedge its bets on these accounts, and its trading operations were not even recorded in its internal system.

The company essentially acts as a “bank” for crypto, with savings and lending services, although of course any business worth its salt in the crypto-sphere avoids the connotation of “bank” as soon as possible. Babel promotes several services, including its lending and borrowing arm, asset management, and some crypto-mining activities.

But despite the company’s finger pointing, Babel has been quick and loose with user funds in the past. Back in 2020, CoinDesk reported based on leaked private conversations between co-founder Del Wang and another unknown person that the company was raising funds from users and that some of these activities had blown up in their faces during a stock market crash.

The company wrote later that during this so-called “Black Friday crash” they had started to “gradually increase the hedge position through options”.

Babel’s failing point didn’t just hurt itself, but other trades that had worked alongside it. Reports from Friday showed Thailand-based exchange Zipmex filed for bankruptcy protectionclaiming he invested around $48 million in Babel and another $5 million in another failed crypto trading platform Celsiuss.

Babel has a restructuring plan after all this mess, with plans to convert $150 million of creditor debt into bonds, then increase further in investments. The company has already posted a $2 billion valuation thanks to institutional investors, so who’s to say how it’s all going to turn out?

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