Babylon Finance was one of four major crypto firms that went under water during the 2022 crash. The other three are Celsius, Voyager and Three arrows capital. Babel Finance stopped withdrawing investors on June 17 due to “unusual liquidity pressures”. The company has suffered heavy losses in its Bitcoin (BTC) and Ethereum (ETH) investments.
Nevertheless, Babel Finance announced a restructuring plan to get out of the hole. Gaining access to the restructuring deck, The Block reported that Babel has lost more than $280 million worth of Bitcoin and Ethereum. Dating back to July 2022, the deck states that the company lost 8,000 BTC and 56,000 ETH in June.
According to the deck, volatility in June led to unhedged positions in proprietary trading accounts generating significant losses. This led directly to the forced liquidation of several trading accounts. These losses prevented Babel’s credit and trading departments from meeting margin calls.
The deck reads,
“Conclusion: Single point of failure – The Proprietary Trading team’s failed operation falls outside the normal course of business of the company, which otherwise ran smoothly with good management and control,”
Furthermore, the deck states that its own trading team manages a number of trading accounts that are not under the management or supervision of the trading department. Neither a trading mandate nor risk controls were implemented for these accounts, and no profit or loss was disclosed.
No term sheets were used to support the orders placed by Babel’s private trading team, and therefore they were not entered into the system. In addition, the company’s own trading team used unlimited amounts of money. The capital was distributed among trading accounts by the portfolio management team.
the plans of Babylon; can it reclaim the lost Bitcoin and Ethereum?
Babel is currently seeking hundreds of millions of dollars in debt and equity as part of its recovery strategy.
According to the deck, the first step is to convert $150 million of the largest creditors’ debt into convertible bonds. It also plans to acquire an additional $250 million to $300 million through convertible bonds. After that, it will receive a $200 million revolving credit from creditors for business rehabilitation.
If the idea works, Babel’s largest creditors would become shareholders.
At the time of writing, Bitcoin (BTC) was trade at $23,928.85, while Ethereum (ETH) was trade for $1,718.84.