Singaporean cryptocurrency platform Babel Finance reportedly lost $280 million after using client assets to trade for its own account. This piece of information potentially reveals one of the reasons that prompted the company to suspend withdrawals over the past month.
Babel Finance: a bad manager
According to a The Block report, Babel Finance would have used the funds of its clients to do “Proprietary Trading (negotiation for its own account)”. An operation that would have cost the Singaporean lending platform $280 million. According to an internal document that the American newspaper was able to recover, this represents an amount equivalent to 8,000 BTC and 56,000 ETH.
“During that volatile week in June, when BTC fell precipitously from 30,000 to 20,000, unhedged account positions [de négociation pour compte propre] recorded significant losses, which led directly to the forced liquidation of several trading accounts and the disappearance of approximately 8,000 BTC and 56,000 ETH”.
Can we read in the document.
As a result, the platform was unable to meet its margin call commitments. Faced with this problem, Babel Finance had opted for the classic SOS solution: the suspension of withdrawals on its platform.
The Block also reports that this isn’t the first time the DeFi firm has used client funds for proprietary trading. In 2020, a report showed that Babel Finance used its users’ assets to boost a Bitcoin trade.
Towards a restructuring plan
Given the situation in which Babel Finance finds itself, the lending platform would seek to raise hundreds of millions to break the impasse. For this, the company hopes to convert its debts into shares and bonds. According to The Block newspaper, Babel Finance plans to raise nearly $450 million to service its debts.
The Singaporean company joins Voyager Digital, 3AC, BlockFi, Genesis, Celsius Network, this long list of centralized DeFi companies in a restructuring situation. If the bankruptcy of these companies has caused losses of hundreds of millions of dollars to tens of thousands of customers, it calls out a lot about DeFi and the need for transparency and decentralization.
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