Babel Finance co-founder Yang Zhou is betting on a new stablecoin to lift the struggling crypto lender out of the financial crisis.
Last June, the Hong Kong-based project was one of three major companies that failed, forcing it to suspend withdrawals. The firm’s proprietary trading desk directed $766 million worth of client funds into risky trading activities. The focus is now on debt repayment.
Babel has offered to use revenue generated from a decentralized finance project minting “Babel Recovery Coins” to pay off debt it owes to creditors. Zhou, who also happens to be the sole director of Babel, believes this new stablecoin can solve the crypto lender’s financial problems.
Yang previously resigned from his managerial position but later resumed. According to a report by Bloomberg, the project in question is baptized – Hope – for which the executive has teamed up with some former employees of Babel in Hong Kong.
Initially, Hope’s namesake stablecoin will use Bitcoin (BTC) and Ether (ETH) as collateral. According to websitethe new asset will maintain its value close to a dollar thanks to arbitrage incentives for traders, unlike popular stablecoins such as USDC, which are fully backed by cash and cash-equivalent assets.
In the meantime, Zhou is also seeking to file a protective moratorium with the Singapore High Court. This would prevent creditors from taking further action against the company for up to six months as it seeks their approval of a restructuring plan.
Who is responsible for losses?
Babel’s new project is touted as a beacon of hope, but the report alleges co-founder Wang Li’s business activities have contributed to its current state. The filing, as seen by Bloomberg, said Li was “responsible” for losses that occurred due to “risky trading activities” that were instructed solely by the executive.
The company is estimated to have lost $524 million worth of Bitcoin, Ether, and other crypto assets as a result. An additional $224 million was lost when counterparty collateral was liquidated after it was unable to meet a large volume of margin calls. These allegations prompted Babel to dump Li from his leadership role in December last year.
Just a month before nearly succumbing to cash pressure, Babel raised $80 million in a Series B funding round led by Circle Ventures, 10T Holdings, Jenerations Capital, BAI Capital and Dragonfly Capital. Family offices in the Asia-Pacific region also participated in the round, bringing the company’s valuation to $2 billion.
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