Cryptocurrency lending company Babel Finance froze withdrawals last year due to financial difficulties, but now hopes to generate revenue through the new Babel Recovery Coins to pay off $7 million in debt.
It is reported that Yang Zhou, the founder of Babel Finance, stepped down as the company’s CEO in 2021, but re-led Babel Finance’s restructuring plan after the company fell into crisis in 2022. Bloomberg reported that Yang Zhou is planning to apply to the Singapore High Court for a stay of protection, requiring creditors not to take further action against the company for six months while it seeks approval for restructuring.
According to a document obtained by Bloomberg, Babel Finance proposes to use the revenue generated by a new DeFi project that mints a new stablecoin “Babel Recovery Coins” to pay off creditors’ debt.
Babel Finance suffered setbacks during the cryptocurrency market crash last year and suspended product redemption and withdrawal functions in June. Babel Finance’s trading platform generated a $6 million deficit using client funds at the time, and these risky trading activities appear to have been directed by co-founder Wang Li.
Babel Finance estimates that the company lost $5 million worth of customers and own funds as a result, and another $24 million when Babel Finance’s counterparties liquidated collateral after they were unable to meet large margin calls.
The document mentions that Wang Li was removed from office last December.
According to people familiar with the matter, Yang Zhou has been planning to launch a DeFi project called Hope after quitting Babel Finance in 2021. Hope’s namesake stablecoin will initially use Bitcoin and Ether as collateral and keep its price anchored at $1 through arbitrage incentives for traders.