QUADRIGA INITIATIVE
CRYPTO WATCHDOG & FRAUD RECOVERY PLATFORM
A COMMUNITY-BASED, NOT-FOR-PROFIT
UNKNOWN
JUNE 2022
GLOBAL
BABEL FINANCE
DESCRIPTION OF EVENTS
"Founded in 2018, Babel Finance started out by providing BTC-backed crypto lending services. Since then, we have grown to become one of the world's largest wholesale crypto financial services providers. By the end of 2021, we had accumulated more than 3 billion USD in loan balances. Based in Hong Kong and Singapore, we assisted global institutional investors and high net worth individuals in developing integrated solutions covering technology, products, and strategies around crypto lending and crypto asset management services."
"Aiming to be the most prestigious institution in crypto finance, we're committed to offering our clients full crypto financial services. By offering an easy, smooth and secure experience, we're building a solid crypto financial infrastructure for the world."
"Our business covers Bitcoin, Ethereum, mainstream stablecoins, and major altcoins in which we deliver a high quality service to more than 600 institutional and high net worth individual clients. Currently, Babel Finance has an average monthly crypto derivative trading volume of over 8 billion USD. Over the years, we have gained the trust of global investors such as Sequoia China Capital, BAI Capital, Zoo Capital, Tiger Global Management, Dragonfly Capital, as well as NGC Ventures. As cryptocurrency is quickly being adopted by mainstream audience across the globe, the importance of bracing for compliance and regulation is paramount."
"At Babel Finance, we are actively applying for licenses and working to enhance our compliance in Asia, Europe, and North America. This will ensure the security of our business as pioneers of the developing crypto industry. Backed by a well-funded network of global partners, Babel Finance is a reliable and strong bridge between Europe, North America, and Asia Pacific's crypto market. Led by our professional trading team we are dedicated to providing stable yields for our clients. Babel Finance looks forward to working with you to build a new crypto finance world."
"Babel, which has 500 clients and limits itself to bitcoin, ethereum and stablecoins, raised $80 million in a funding round last month, valuing it at $2 billion. It had ended last year with $3 billion of loan balances on its balance sheet."
"Crypto lenders gather crypto deposits from retail customers and re-invest them, proclaiming double-digit returns and attracting tens of billions of dollars in assets."
"Hong Kong-based Babel Finance temporarily suspended the withdrawals and redemption of crypto assets on Friday, as the crypto lender scrambles to pay its clients after the recent slump in the digital currency market." "[C]rypto lender Babel Finance froze users’ assets and is currently considering restructuring options."
"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. We are in close communication with all related parties on the actions we are taking in order to best protect our customers. During this period, redemptions and withdrawals from Babel Finance products will be temporarily suspended, and resumption of normal service be notified separately. We apologize sincerely for any inconvenience caused."
“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 company said.
"Babel Finance management has taken the following steps to alleviate the company's liquidity situation:"
"1. We have carried out an emergency assessment of the company's business operations to understand the company's liquidity status."
"2. 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."
"Babel Finance disputes that it is in default on its loan from Orthogonal Trading out of the Orthogonal USDC Pool, and has communicated this position to Orthogonal’s representatives." "Babel Finance has engaged in, and will continue to maintain, constructive dialogue with representatives of Orthogonal Trading about the steps being taken by Babel Finance to address its liquidity position, as part of the comprehensive steps taken to respond to the current dynamics in the crypto market."
"3. We have actively communicated with shareholders and potential investors, and will continue to communicate and obtain liquidity support."
"Babel Finance will be consulting with its various advisors as to whether or not the disputed actions taken by Orthogonal Trading may give rise to a cause of action by Babel Finance against Orthogonal. However, constructive mutually beneficial dialogue remains Babel Finance’s preferred path for addressing Orthogonal’s concerns about Babel’s plans for addressing the current liquidity position."
"Given the current context of severe market volatility, Babel Finance’s management will continue to communicate closely with customers, counterparties, and other partners, and provide updates in a timely and transparent manner."
"Babel Finance will actively fulfill its legal responsibilities to customers and strive to avoid further transmission and diffusion of liquidity risks. We thank our customers for their understanding and support during this period, and hope to obtain further support from our partners."
"At around 9:00AM Hong Kong time [on June 22nd, 2022], Babel Finance's official Twitter @babelfinance experienced an unknown attack, causing the account to be abnormally suspended. We are actively contacting Twitter to restore the account. Meanwhile, we discovered the following fake accounts on Twitter: @BabelFinance_, @BabelFinance__. We remind our customers and partners to be vigilant to avoid fraud and deception."
"Reportedly, the crypto firm refuted the rumor that it had told its partners that it was insolvent. In terms of the speculation regarding its liquidity crisis, the firm clarified that it had no business with the crypto hedge fund Three Arrow Capital, which, as CryptoPotato reported earlier, sought bailouts through “asset sale and a rescue by another firm.”"
"The troubled crypto lender is in conversations with large institutions for solutions, including “setting up a new entity to take up some of the debts.”"
“Babel Finance is taking action to best protect the interests of our clients," a company spokesperson told CoinDesk. "We are in close communication with all related parties and will share updates in a timely manner."
"Though the company noted that it would “provide updates in a timely and transparent manner,” it did not release details regarding when the platform will let users withdraw their funds."
Babel Finance is a global investment firm for high net worth individuals. In June 2022, they stopped allowing withdrawals of assets on their platform. No further notice has been available on the website since July 2nd, and no updates have been available on Twitter since June 20th. It is unclear if any assets will be recovered at any point in the future.
HOW COULD THIS HAVE BEEN PREVENTED?
Babel Finance provides limited public transparency and visibility into where funds have been invested. It is thus unclear what assets back the fund, and it appears they have made unkeepable promises to investors. A better system would see periodic third party reviews to ensure firms will always be able to meet their obligations.
https://ca.proactiveinvestors.com/companies/news/986546/celsius-user-funds-remain-in-the-balance-as-partial-debt-repaid-986546.html (Jul 12)
https://www.cnbc.com/2022/06/17/babel-finance-suspends-withdrawals-as-crypto-markets-slump.html (Oct 19)
Babel Views (Oct 19)
About Babel Finance-Crypto Financial Services (Oct 19)
Babel Views (Oct 20)
@emilyjnicolle Twitter (Oct 20)
Babel Views (Oct 20)
Babel Views (Oct 20)
Crypto lender Babel Finance valued at $2 billion after latest fundraising | Reuters (Oct 20)
Babel Finance Set to Delay Debt Payments, Refutes Invovlement With 3AC (Oct 20)
Babel Finance Suspends Withdrawals, Citing 'Unusual Liquidity Pressures' (Oct 20)
Babel Finance Halts Withdrawals, Citing Low Liquidity - Crypto Briefing (Oct 20)
Babel Finance - We have your best interest in mind (Oct 20)
@Yogita_Khatri5 Twitter (Oct 20)
Babel Finance capta US$40 millones en ronda Serie A para su negocio de préstamos criptográficos | TEKIOS (Oct 20)
https://coinquora.com/crypto-lender-babel-finance-gains-40m-from-investors/ (Oct 20)
https://wublock.substack.com/p/investigation-how-2billion-lending (Oct 25)
Crypto.com Weekly DeFi Update (Week 24, 13/06/2022 – 19/06/2022) (Dec 1)
@Coachkcrypto Twitter (Sep 22)
Here’s how Babel Finance plans to repay $766 million to creditors through stablecoin ‘Recovery Coin’
(Apr 10)
