Babel Finance explores new restructuring opportunities with DeFi project

Babel Finance, one of many cryptocurrency lending firms that suffered losses during the cryptocurrency winter of 2022, is exploring new restructuring opportunities to pay back its creditors. The Hong Kong-based firm has announced plans to build a new decentralized finance (DeFi) project called Hope, which aims to generate revenue to repay the company’s debts.

According to reports, Hope will mint a new stablecoin that will be used as a “recovery coin” for Babel. Unlike major stablecoins like Tether (USDT) and USD Coin (USDC), Hope’s namesake stablecoin will reportedly use Bitcoin (BTC) and Ether (ETH) as collateral, maintaining its 1:1 ratio with the U.S. dollar through arbitrage incentives for traders

Babel co-founder Yang Zhou is leading the restructuring efforts, and has accused another co-founder, Wang Li, of being responsible for the company’s losses. The company estimates that it owes customers as much as $524 million worth of BTC, ETH and other cryptocurrencies due to losses allegedly caused by Wang’s risky trading activities. Another $224 million was reportedly lost when Babel counterparties liquidated collateral after the firm could not meet a large volume of margin calls.

Babel’s liquidity issues are not unique, with several prominent industry lenders facing similar challenges. Voyager Digital, Celsius Network, Genesis Global and Hodlnaut are among those that have experienced serious liquidity issues due to the cryptocurrency winter in 2022. Genesis owes $150 million to Babel, its third-biggest named creditor, according to a January Chapter 11 filing.

In late February, Voyager customers voted for a restructuring plan that included Binance’s United States-based business, Binance.US, acquiring Voyager’s assets. Babel’s restructuring plans involve Hope, which will generate revenue to repay the company’s debts. Yang Zhou hopes that this project will help to save the company and restore its reputation in the cryptocurrency lending space.


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Zipmex Files for Bankruptcy Protection, Seeking Moratoriums from Third Party Creditors

Singapore-based crypto trading platform Zipmex has halted some of its core activities in response to its partner Celsius Network and Babel Finance’s financial woes, which it has exposed. Reportedly, the trading platform is seeking bankruptcy protection from the local court. 


With the latest turn of incidents, Zipmex announced it has submitted an application for a moratorium in Singapore that will protect it from its creditors in the country as long as it explores various solutions to its woes. Local media reported, five applications has been submitted on last Friday (July 22) on behalf of the firm’s different entities seeking moratoriums on legal proceedings for up to six months.

“We submitted moratorium applications in Singapore for all Zipmex entities,” Zipmex said in the announcement, “This helps protect Zipmex against third party actions, claims, and proceedings while it is active, and enables the team to focus all our efforts on resolving the liquidity situation, without having to worry about defending potential claims or adverse actions while we are doing so. It is important to note that a moratorium is not a liquidation of any company, and there is no significant status change from our last update.”

According to local law, such a filing automatically grants respite for either 30 days or until a Singapore court makes a decision on the application, whichever is earlier.

As early as June this year, American digital currency trading platform Coinbase Global Inc was planning to invest in Zipmex after a successful acquisition deal. 

Blockchain.News reported earlier that Zipmex is in talks with “Interested Parties” with whom it was discussing potential bailout options. While this option is open to the firm, it is also optimistic that it can salvage some funds from the $48 million Babel Finance is owing in its bankruptcy proceedings.

The Zipmex situation can best be described as an unforeseen one because of the unsecured exposure it has. The firm has said it would not mind writing off the $5 million claims it has against Celsius Network against its own balance sheet, as it has foreseen that the process to claim the funds may be very long and almost impossible.

Amid the filed moratorium and its ongoing woes, Zipmex said it will “continue to operate the Trade Wallet, NFT platform, and other products as normal, and there is no planned interruption to” these services.

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It is in Talks with “Interested Parties” for Bailout, Says Zipmex

Zipmex, a cryptocurrency trading platform, is looking ahead as it has confirmed that it is in talks with interested parties who would like to bail out the platform from its recently identified woes. 


In an announcement it shared on its official Twitter account, Zipmex implied it was not at liberty to disclose the name of the potential backers as it is not bound to do so by a Memorandum of Understanding (MoU) already signed.

“Our conversations with various interested parties have progressed significantly. One of those parties has offered terms in an MOU which includes confidentiality obligations to be able to commence Due Diligence,” the firm said in the Tweet.

It is unclear how or in what capacity the noted “interested parties” will want to help the firm considering the halt of its activities was hinged on the financial difficulties of its partners. The South Asian crypto app revealed that it had massive exposures to two of the most distressed crypto lenders in the industry, including Celsius Network and Babel Finance, respectively.

Zipmex revealed that it had an unsecured loan of $48 million extended to Babel Finance and $5 million to Celsius. While the company said, it is willing to write off its minimal exposure with Celsius against its own balance sheet.

The due diligence being conducted by the interested parties in Zipmex’s business mimics the type Nexo is currently conducting on Vauld Group, another distressed crypto lending platform that halted its withdrawals a few weeks back.

Exploring equity takeovers and significant loan extensions have been one of the most sought-after bailout approaches that distressed crypto firms are willing to secure as the ecosystem’s future is unsure with the current sweeping liquidity crisis. Firms like FTX Derivatives Exchange are at the forefront of this bailout, with one extended to BlockFi and Voyager Digital, respectively.

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Babel Finance Hires Restructuring Specialist Houlihan Lokey: Sources

Babel Finance, a Hong Kong Bitcoin financial services company offering lending and asset management services, has hired U.S. investment banking firm Houlihan Lokey, a specialist with wide experience in restructuring and acquisitions to advise in distressed fund situations. People with familiar sources have disclosed the development.

“Babel is looking at restructuring. They’ve hired Houlihan Lokey or are in the process of hiring them. They’re in the process of signing an engagement letter,” one source said.

Another source also stated: “They [Babel] are the next major crypto firm to have some kind of some kind of outcome over the next couple of weeks, whether it’s sorting out and getting buy-in from creditors or declaring insolvency or default.”

The appointment of Houlihan Lokey would prove valuable to Babel, particularly during these difficult times, and will help to ensure that the firm continues offering first-class services to its customers.

The move comes after two weeks ago, Babel suspended customer withdrawals amid liquidity concerns.  

On June 17, Babel Finance halted withdrawals and redemption of crypto assets citing “unusual liquidity pressures” amid the current extreme volatility facing the crypto market.

A few days later, Babel’s team stated that they conducted an emergency evaluation of the firm’s business operations to understand its liquidity status of the company. The team also said they addressed the company’s liquidity situation after reaching agreements with major counterparties on the repayment of borrowed funds back to the lenders to ease short-term liquidity.

“Babel Finance will actively fulfill its legal responsibilities to customers and strive to avoid further transmission and diffusion of liquidity risks,” the firm further stated.

Crypto Lending Crisis

Even as Babel Finance reassures its clients and investors that its financial situation is sound, its dramatic incident is another case that has put the stability of the lending market in the spotlight.

Babel’s troubles come at a time when the crypto market is experiencing severe distress triggered by the plunge of the Terra ecosystem in May, followed by liquidity crisis facing Celsius Network and Three Arrows Capital.

Recently, Celsius Network, a major crypto lending platform, hired attorneys specialized in business restructuring from the law firm Akin Gump Strauss Hauer & Feld LLP to advise on potential solutions to its growing financial problems.

On 13th June, Celsius halted all withdrawals, swaps, and transfers between accounts due to ‘extreme market conditions.’

While Celsius was first looking for potential financing options from investors, it later decided to consider financial restructuring.

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Babel Finance Reaches Agreement on Modalities for Repayment of its Loans

Following the halt of its withdrawals amidst its inability to pay its creditors as the crypto market meltdown took a bearish turn in the past few days, Babel Finance has announced measures to ease off its immediate operational burdens. (19).jpg

While it said when it halted its withdrawals that it was experiencing unpleasant liquidity risks, the platform noted in a Monday announcement that it has “carried out an emergency assessment of the company’s business operations to understand the company’s liquidity status,” as one of the major measures to curb its current woes.

A major step the company said it is taking is that it has reached an agreement with some of its stakeholders, who are willing to give it a flexible time to repay its loans while sourcing for liquidity across the board.

“We have communicated with major counterparties and relevant customers and reached preliminary agreements on the repayment period of some debts, which has eased the company’s short-term liquidity pressure,” the firm said, “We have actively communicated with shareholders and potential investors, and will continue to communicate and obtain liquidity support.”

While Babel Finance has highlighted its plans to continually update its community about its plans and measures to get right into business, the platform said it is committed to fulfilling all of its obligations to reduce its liquidity risk shortly.

Besides Babel Finance, more players in the crypto lending ecosystem are also on edge at the moment as liquidity risks have become a mainstream occurrence. Celsius Network is the most prominent of these players, with its major operations halted due to extreme market conditions.

While Celsius seems to have shunned the offer from Nexo, which wants to buy up its collateralized loans, the embattled platform said it needed more time to come up with a sustainable solution for all.

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Babel Finance Halts Withdrawals as Crypto Market Plunges

Babel Finance, a cryptocurrency lending firm based in Hong Kong, on Friday, announced that it has temporarily paused the withdrawals and redemption of crypto assets. The move comes as the crypto lender appears struggling to pay its customers after the recent plunge in the cryptocurrency market.

“Recently, the crypto market has seen major fluctuations, and some institutions in the industry have experienced conductive risk events. Due to the current situation, Babel Finance is facing unusual liquidity pressures,” the firm stated.

The company further elaborated: “Babel Finance is taking action to best protect the interests of our clients. We are in close communication with all related parties and will share updates in a timely manner.”

Babel has 500 customers and limits itself to Bitcoin, Ethereum, and stablecoins for its business operations. Last month, the crypto lender raised $80 million in a funding round that gave the firm a valuation of $2 billion. The firm ended last year with $3 billion of loan balances on its balance sheet.

Market Contagion Fears Spread

On Thursday, rival crypto staking and yield generation platform Finblox, based in Hong Kong, made a similar move, imposing a monthly withdrawal limit of $1,500 and suspended rewards in connection with uncertainty surrounding crypto hedge fund Three Arrows Capital and market volatility.

In a statement, Finblox said that it made the decision as it evaluates the impact of Three Arrow Capital’s recent issues. Last December, Three Arrow Capital made an investment of $3.6 million in the Hong Kong-based platform. Early this week, Three Arrows Capital, one of the largest crypto hedge funds in the world, raised fears of facing potential insolvency risks after several leading exchanges liquidated the fund’s positions.

On Monday, crypto prices fell hard triggered by major U.S. cryptocurrency lending company Celsius Network pausing withdrawals and transfers, as it cited “extreme” market conditions.

The crypto market is at its lowest point since December 2020, with Bitcoin trading narrowly above $20,000 while Ether holds onto the psychological level of support at $1,000. In the past few weeks, crypto markets crashed as rising interest rates and increasing inflation prompted investors to ditch riskier assets across financial markets.

The recent move by the Federal Reserve to increase interest rates by 0.75 percentage points, has led to a number of bubbles including tech stocks and crypto tokens. Crypto investors have also been adversely impacted by the collapse of the TerraUSD and Luna tokens in May.

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Babel Finance Is Letting Crypto Mining Firms Use Machines as Loan Collateral

Babel Finance is letting bitcoin mining firms put up their machines as loan collateral so the lender can offer them better terms.

The loan-to-value ratio (LTV) for these loans is 30%, in part because Babel keeps the freshly mined crypto until the borrower pays back the loan. The LTV is significantly cheaper than the 160% Babel normally charges, which means borrowers would need to put up $1.6 million worth of bitcoin in order to borrow $1 million in U.S. dollars. 

In a bull market miners are increasingly uneasy parting ways with mined cryptocurrency. These loans allow the miners to cover expenses like paying electricity bills or purchasing new equipment while giving up less BTC or ETH.

“For miners, the biggest asset they have is their machines,” said Lei Tong, Babel’s managing director of financial services. “After the March 12 price drop, they really wanted to keep as many coins as possible. Putting their machines up as a mortgage is a much better way for them to get loans versus using bitcoin.” 

The service launched in June 2020 and has since accumulated $22 million worth of machine-backed loans. 

To offer the service, Babel has teamed with the world’s largest ETH mining pool, Spark Pool; one of the largest BTC mining pools, F2Pool; and bitcoin mining farm operators Hashage and Heng Jia Group.

Machine-backed loans now make up almost 5% of the company’s $450 million in total outstanding loans.

Babel Finance’s primary customers are miners, and the lender is aiming to help Chinese miners compete with Western institutions who are buying up the machines in a competitive market, said Tong. These new purchasers have increased demand but supply remains low because of a scarcity of computing chips that manufacturers use to create the machines.

Mining farms operate the machines while holding them as collateral for Babel, and the lender keeps the mined cryptocurrency; this allows Babel to collect the full value of the loan even if the price of the machine is undervalued during a market crash, Tong said. 

“Normally it would be six terms for six months,” Tong said. “When they pay the terms, we’ll release the coins mined by the machines.” Babel knows the type of mining machine that’s being offered as collateral so it can estimate the number of coins the machines should be producing. 

Babel audits the machines daily by double checking the output that should be coming from each machine with the mining farms and pools. Ten secondhand machine dealers who regularly work with mining machine buyers also price the machines by looking at the computational power of the mining network and the price of the cryptocurrency, Tong said. 

In the future, the lender wants to let miners use their machines to hedge against the risk of their cryptocurrency investments.

“It’s quite complicated,” Tong said without elaborating further, but he added that the hedge would protect miners from losing their profits from market crashes.



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