Babel wants to repay creditors via special ‘recovery coins’: Report

cointelegraph.com:

Babel Finance, one of cryptocurrency lending firms shaken by the bear market of 2022, is exploring new restructuring opportunities involving minting a new token.

Babel co-founder Yang Zhou is planning to build a new decentralized finance (DeFi) project in order to generate revenue to repay debts owed to creditors, Bloomberg reported on March 5.

Called Hope, the potential DeFi project aims to mint a new stablecoin serving as a “recovery coin” for Babel, according to Yang’s restructuring proposal.

Unlike major stablecoins like Tether (USDT) or USD Coin (USDC), Hope’s namesake stablecoin will reportedly use Bitcoin (BTC) and Ether (ETH) as collateral, maintaining its 1:1 ratio with the U.S. dollar through arbitrage incentives for traders, the filing notes.

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 instructed solely by Wang.” Wang stepped down from his CEO position at Babel in December amid the company’s issues.

According to Babel’s estimations, the company owes as much as $524 million worth of BTC, ETH and other tokens to customers due to losses allegedly caused by Wang’s risky trading activities. Another $224 million was reportedly lost when Babel counterparties liquidated collateral after the firm became unable to meet a large volume of margin calls.

As previously reported, Babel was one of several crypto lenders that experienced serious liquidity issues due to the cryptocurrency winter in 2022. The Hong Kong-based firm suspended withdrawals and redemptions from its products in June, citing “unusual liquidity pressures.”

Related: Hodlnaut founders propose selling the firm instead of liquidation

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