• Babel Finance has proposed to create a new stablecoin, “Babel Recovery Coins”, to generate revenue and repay $766 million to its creditors.
• The proposal came after the company recorded massive losses last year during the cryptocurrency market’s downturn.
• Babel estimates that $524 million worth of Bitcoin, Ether and other tokens owned by the company and its customers were lost due to Wang Li’s risky trading activities.
Babel Proposes New Stablecoin To Repay Creditors
Financial service provider Babel Finance has proposed developing a new stablecoin – “Babel Recovery Coins”– in order to generate revenue and repay $766 million to its creditors. This plan was outlined in a filing, though no further details have been revealed. The proposal comes after the company faced financial difficulties last year during the cryptocurrency market’s downturn.
Cause of Financial Difficulties
The cause of Babel Finance’s financial difficulty is attributed to its proprietary trading desk using customer funds and accumulating an order-book deficit of $766 million. The filing claims that Wang Li, who was ousted from his position as a leader in Babel back in December is accountable for these losses. It states that his risky trading activities seem to have been directed exclusively by him resulting in an estimated loss of $524 million worth of Bitcoin, Ether and other tokens owned by the company and its customers. An additional loss amounting up to $224 million was also incurred when counterparties liquidated collateral after Babel failed to meet large margin calls.
To overcome this financial crisis, Yang Zhou (the sole director at Babel) plans on submitting a moratorium of protection request for six months which will allow creditors not take any action against them while they seek approval on their restructuring proposal which involves creating new stablecoins using their earnings from their DeFi project called Hope which will be initially backed by bitcoin and ether as collateral and eventually by other digital assets too once it launches successfully later this year.
Risk Involved In Trading Cryptocurrencies
This incident showcases how volatile cryptocurrencies can be if invested without proper knowledge or expertise leading others who are unaware into heavy losses like in this case where even with experienced professionals have had significant losses due to poor decision making or poor risk management strategies employed while trading crypto assets leading them into such huge debts with creditors that needed settling through creative solutions like issuing new stablecoins here in this case with Babels Recovery coins offering as one such solution but not always available ones either depending upon different circumstances involved in each individual situation so investing wisely is key here when it comes down handling digital assets like cryptocurrencies especially if you aren’t an expert yourself but still wish venture into it otherwise enlisting help from someone knowledgeable could save you from unnecessary losses should anything go wrong unexpectedly .
In conclusion, it is essential for anyone looking into investing or trading cryptocurrencies must do thorough research before engaging themselves in such activities as losing out on ones investments can lead one deep into debt if proper precautionary measures aren’t taken beforehand thus ending up needing some kind of creative solution like what we saw here with Babels recovery coin offering as one possible option which may not be available all times depending upon ones own unique set of conditions so make sure you know what you’re getting yourself into before taking any risks when dealing with highly speculative asset classes such as those involving cryptos otherwise things might end up not going your way leading you towards bigger problems than anticipated .