Home / Markets / Cryptocurrency /  Babel lost $280 mn due to unhedged propriety trading: Report
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Beleaguered crypto lending platform Babel Finance lost over $280 million in customer funds due to failed propriety trading after the markets suffered significant losses over the last few months, The Block on Friday reported, quoting a restructuring proposal deck.

The Asian lender faced liquidation owing to a significant market collapse, losing almost 8,000 Bitcoin (BTC) and 56,000 Ethereum (ETH) 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 deck, according to the report, states that unhedged positions in proprietary trading accounts accrued large losses during a turbulent week in June when BTC plunged abruptly from $30,000 to $20,000, forcing liquidation of several trading accounts and wiping away 8,000 BTC and 56,000 ETH.

"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 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 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 LiveMint did not elicit any response from Babel Finance.

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