Babel Finance, one of the cryptocurrency lending firms rocked by the 2022 bear market, is exploring new restructuring opportunities that involve minting a new token.
Babel co-founder Yang Zhou plans to build a new decentralized finance (DeFi) project to generate revenue to pay off debts owed to creditors, Bloomberg reported March 5.
Called Hope, the potential DeFi project aims to mint a new stablecoin that will serve as a "recovery coin" for Babel, according to Yang's restructuring proposal.
Unlike major stablecoins like Tether (USDT) or USD currency (USDC), Hope's eponymous stablecoin will reportedly use Bitcoin (BTC) and ether (ETH) as collateral, maintaining its 1:1 ratio to the US dollar through arbitrage incentives for traders, the document notes.
The document also alleges that another Babel co-founder, Wang Li, was responsible for the losses, stating that "the risky trading activities appear to have been directed solely by Wang." Wang resigned from his post as chief executive at Babel in December amid the company's woes.
According to Babel's estimates, the company owes up to $524 million worth of BTC, ETH and other tokens to clients due to losses allegedly caused by Wang's risky trading activities. Another $224 million was reportedly lost when the Babel's counterparties liquidated collateral after the firm was unable to meet a large volume of margin calls.
As previously reported, Babel was one of several crypto lenders experiencing serious liquidity problems due to the crypto winter of 2022. The Hong Kong-based firm Suspended withdrawals and refunds of its products in June, citing "unusual liquidity pressures."
Related: Hodlnaut founders propose to sell the company rather than liquidate it
Major industry lenders including Voyager Digital, Celsius Network, Genesis Global and Hodlnaut have faced similar issues. Genesis owes $150 million to Babel, its third-largest named creditor, according to a January Chapter 11 filing. All of these companies are now working hard to come up with restructuring plans to pay off their creditors and save their businesses.
In late February, Voyager clients voted in favor of a restructuring plan involving Binance's US business, Binance.US, acquiring Voyager's assets.
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