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Crypto lender Babel Finance lost more than $280 million worth of Bitcoin and Ether due to proprietary trading with customer funds, according to a restructuring proposal deck obtained by The Block. The company is now attempting to convert $150 million of its debt to convertible bonds and raise an additional $200 million in revolving credit as a part of its bailout plan.
$280M Lost in Proprietary Trading with User Funds
Troubled crypto lending firm Babel Finance has reportedly sustained severe losses in proprietary trading with customer funds, just a month after the company saw multiple employee exits. Babel lost 8,000 BTC and 56,000 ETH, or around $280 million.
“In that volatile week of June when BTC fell precipitously from 30k to 20k, unhedged positions in [proprietary trading] accounts chalked up significant losses, directly leading to forced liquidation of multiple Trading Accounts and wiped out ~8,000 BTC and ~56,000 ETH.”
states the deck.
Because of these heavy losses, the firm was unable to pay margin calls and now looks to revive its business through a restructuring plan. According to the deck, Babel seeks to convert its significant debt into bonds and secure hundreds of millions in revolving credit.
More specifically, the embattled crypto lender first intends to convert $150 million of the biggest creditors’ debt to convertible bonds. Then, the company will attempt to secure $250 million to $300 million in convertible bonds and $200 million in revolving credit to restore its business.
If executed successfully, the plan will turn the company’s biggest creditors into shareholders. Babel is just one of the numerous crypto firms that have suffered from financial woes amid the crypto winter in recent months. Earlier this month, Voyager Digital and Celsius Network both filed for bankruptcy.
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Babel’s Financial Woes Continue
Babel’s heavy losses from proprietary trading mark the latest of the company’s many financial woes this year. Last month, the crypto lender saw a series of employee exits following a critical liquidity crunch.
The company halted withdrawals on June 17 due to “unusual liquidity pressures”, in the same period when Celsius paused withdrawals as well. Babel’s financial troubles came just weeks after the firm raised $80 million in funding at a $2 billion valuation.
Babel is just one of the numerous cryptocurrency firms that lost employees this year after the top-rated exchange Coinbase and BlockFi announced layoffs.
Do you think Babel will manage to revive its business? Let us know in the comments below.