According to a proposal deck that was referenced in a recent publication, Babel’s losses included the elimination of 8,000 BTC and 56,000 ETH that were held in unhedged proprietary trading positions.
According to a report by The Block, which cited the cryptocurrency company’s restructuring proposal deck, the troubled cryptocurrency lender Babel Finance, which froze customer withdrawals in June in the midst of the crash of the cryptocurrency market, reportedly lost more than $280 million of its customers’ funds in bad trading bets.
According to the information provided in the proposal, the losses incurred by Babel Finance were the result of proprietary trading involving 8,000 bitcoin (BTC) and 56,000 ether (ETH). The unsuccessful bets took place a month ago when the platform was in danger of being liquidated due to the widespread deleveraging occurring in the cryptocurrency market.
The company claims in the deck that unhedged positions “chalked up huge losses, thereby contributing to the forced liquidation of many Trading Accounts” when the price of Bitcoin fell from $30,000 to $20,000. This occurred as Bitcoin’s value fell from $30,000 to $20,000.
These accounts were responsible for the loss of roughly $280 million worth of customer cash, which amounted to around 8,000 BTC and 56,000 ETH.
Plans for capitulation as well as restructuring
Babel’s capitulation escalated out of control when its lending and trading operations were unable to fulfill margin calls and when the company ran out of customer funds and could no longer honor withdrawals.
The financial services provider ran into difficulties not long after it closed its Series B funding round in May, bringing in $80 million. Investors such as Jeneration Capital, BAI Capital, 10T, Circle Ventures, and Dragonfly Capital were among those who contributed to the financing effort, which was successful at a valuation of $2 billion.
Babel Finance is currently trending with other problematic crypto enterprises such as Voyager Digital and Celsius Network, both of whom have filed for bankruptcy as a result of the market slump and the failure of proprietary trading.
The failure of the cryptocurrency hedge fund known as Three Arrows Capital (3AC) and the subsequent contagion only served to make the situation more unclear.
The Babel team is trying to convert convertible bonds worth $150 million worth of debt owed to the company’s major creditors as part of its preparations to restructure the company. The lender also plans to supplement its survival kit with an additional $250 million to $300 million in the form of convertible bonds, and it anticipates receiving more funding via a revolving credit line of $200 million.
According to the presentation deck, the strategy eventually includes Babel Finance’s key debtors among the company’s shareholders.
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