Babel Finance Lost $280 Million Due To Unhedged Propriety Trading: Report

Zinger Key Points
  • Babel Finance lost $280 million in customer funds due to unhedged propriety trading.
  • Babel is seeking to raise hundreds of millions of dollars in debt and equity capital as part of its recovery strategy.

Beleaguered crypto lending platform Babel Finance lost more than $280 million in customer funds due to failed propriety trading after the markets suffered significant losses over the past few months, The Block reported Friday, quoting Babel's restructuring proposal deck.

The Asian lender faced liquidation owing to a significant market collapse, losing almost 8,000 Bitcoin BTC/USD and 56,000 Ethereum ETH/USD in June.

The lending and trading divisions of Babel were unable to satisfy counterparties' margin requests as a result of these significant losses.

The company, which had recently completed an $80 million Series B financing round and gained a valuation of $2 billion, had in June paused withdrawals citing unusual liquidity pressures.


Positions Unhedged Despite Risky Business

The proposal deck, according to the report, stated unhedged positions in proprietary trading accounts accrued large losses during a turbulent week in June when Bitcoin plunged abruptly from $30,000 to $20,000, forcing liquidation of several trading accounts and wiping away 8,000 Bitcoin and 56,000 Ethereum.

"Conclusion: Single point of failure - The Proprietary Trading team's failed operation falls outside of the company's normal business which has otherwise been running smoothly with proper management and control," the proposal deck stated.


Babel's Proposed Restructuring

Babel is currently attempting to raise hundreds of millions of dollars in debt and equity capital as part of its recovery strategy.

According to the proporsal deck, the first step is to convert $150 million of the debt owed by the largest creditors into convertible bonds.

It also plans to acquire $250 million to $300 million through convertible bonds, after which it would obtain a $200 million revolving credit from creditors "for business revival."

A request for comment from Benzinga did not elicit a response.

Photo: T. Schneider via Shutterstock

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