Babel Finance creditors weigh unusual rescue plan: liquidate or accept Hope

Babel Finance, the Hong Kong-based crypto financial services provider that froze withdrawals a month after TerraUSD (UST) collapsed, is offering its creditors a choice: Liquidate and get nothing, or accept a deal that relies on a new and not-yet-stable stablecoin.

The deal may sound harsh, but according to co-founder Flex Yang, whose legal name is Yang Zhou, it’s the only solution for creditors to get their money back.

Flex Yang is back at the helm of Babel Finance and pitching the Hope stablecoin as a way to pay back creditors. / Photo image: Babel.finance

While it may be easy to assume that Yang’s offer is an attempt to strongarm creditors, it’s worth remembering that he wasn’t responsible for Babel’s meltdown.

Yang co-founded Babel Finance along with “Del” Wang Li in 2018 and left the CEO position in December 2021 to pursue other interests in crypto. One of those projects was developing a new stablecoin.

When Yang left, Babel had a loan balance sheet of over US$3 billion. Then in May 2022, with Wang in the CEO’s seat, the platform raised US$80 million in a series B round, pushing its valuation to US$2 billion.

Babel’s main business line was crypto lending and trading. Its clients were institutional investors and ultra-high-net-worth individuals.

But May was Babel’s last good month: the platform froze withdrawals about a month later on June 17, 2022 – just a month after the collapse of Terraform Labs and the UST stablecoin.

Babel reportedly lost US$766 million while using customer funds for trading. Court documents allege Wang, who was removed as CEO in December 2022, was responsible for the losses.

“The risky trading activities appear to have been instructed solely by Wang,” according to court documents seen by Bloomberg.

Yang back in charge

Yang is now the sole director of the company. Earlier this month, Babel filed for a six-month moratorium in Singapore to restructure its financial position and work with creditors to repay its debts.

Yang is now pitching his stablecoin project – originally developed during his time away from the company – as a way for investors to recoup their losses.

A flow chart showing how revenue generated by Hope would be funneled back to creditors. / Image Credit: Babel Finance

“We don’t have anything. So if you want to have something to come back to, or if you really want to have some hope, then we need to build a whole new project,” Yang says he told creditors.

Three stages to make Hope stable

Avoiding the mistakes of other stablecoins