While Babel citing market an area or arena, online or offline, in which commercial dealings are conducted. volatility a statistical measure of dispersion of returns, measured by using the standard deviation or variance between returns from that same security or market index. as the main culprit, the company funded trading teams that operated outside of its core protocol. The company is now looking to raise capital capital is most commonly defined as the large sum of money you would use to invest. to keep itself afloat and fix what happened.
- Babel Finance lost USD $280 million from customers.
- He cited market volatility and poor fund management as the main causes.
- It is not the first time that Babel operates client a client is software that can access and process blockchain transactions on a local computer. A common application of this is a cryptocurrency software wallet. funds in the form of “opaque”.
- The company has a plan to be able to recover and continue operations.
Undoubtedly, the fall of the cryptocurrency cryptocurrencies are digital currencies that use cryptographic technologies to secure their operation. market over the last few months affected a good part of the companies that offer financial services with digital digital technologies are these electronic tools that have the ability to generate, store or even process data. currencies. This was the case of Babel Finance, The Asian-based entity also had to suspend customer withdrawals to avoid insolvency, raising fears among those affected.
The reasons behind the measures of Babel Finance
New reports recently published reveal that the measures of Babel Finance were motivated by the loss of some USD $280 million in funds, which were BTC y ETH, This was due to the market volatility that resulted in the fall of the aforementioned digital currencies, coupled with poor management by its trading team.
- Crypto lending platform a place to buy, sell and store cryptocurrency Babel Finance suspends withdrawals due to “unusual liquidity how easily a cryptocurrency can be bought and sold without impacting the overall market price. pressures”
According to reports, the drop in prices led to the Babel Finance to lose about 8,000 BTC and another 56,000 ETH durante el pasado mes de julio tras asumir las liquidaciones que se dieron en ese período. Al respecto, la compañía alegó:
“Durante esa semana tan volátil de junio, cuando BTC cayó pronunciadamente de los USD $30.000 a USD$20.000, las posiciones sin cobertura en las cuentas… acumularon pérdidas significativas, lo que derivó en la liquidación forzosa de varias cuentas comerciales. Esto supuso la eliminación de unos 8.000 BTC y otros 56.000 ETH”.
According to the team responsible for Babel Finance, This downturn meant that the operations and lending departments were unable to meet client demands:
“In conclusion: The single point of failure had to do with the erroneous operations of the proprietary trading team, which were outside the general supervision of the company. The rest worked smoothly with the appropriate management and control for the case”.
Mismanagement of funds
As he explains Babel Finance, proprietary trading teams operate multiple accounts that are not directly supervised by the responsible organization, which means that no risk controls or trading rules are in place to prevent possible adverse outcomes. It is worth noting that these operations did not report results in the systems either, which made it difficult to monitor them and see how they were evolving.
Consequently, Babel released an unlimited amount of funds for the trading teams that operated this kind of accounts. Therefore, when the prices of major cryptocurrencies fell so sharply, they were unable to adequately cope with the volatility of the market and ended up losing the assets due to the high volatility.
Apparently, some reports expose that this is not the first time that the team of Babel makes risky use of user funds, as in the late 2020s the company leveraged some of the users’ assets to boost Bitcoin the biggest and most popular cryptocurrency in the world. It is a decentralized digital currency that enables users to make trustless peer-to-peer transactions. trading, which did not go well and was at risk of insolvency when prices suddenly went down.
By that time, theTether attended and supported Babel in order to overcome the effects of the fall. But regarding the current situation, a company spokesman said they were working closely with customers, investors and other parties to find the best course of action.
The plan of Babel Finance
After the difficult situation it is facing, Babel now plans to raise capital in a new round of funding, and details that the plan is as follows:
- The first would be to convert about $150 million of the debt into convertible bonds.
- It then contemplates raising between USD $250 – 300 million in convertible bonds.
- Y luego la idea es asegurar un crédito renovable por otros USD $200 millones, esto último para restaurar su negocio.
Si todo sale según lo planeado, los acreedores se convertirían en accionistas de Babel Finance, but it remains to be seen whether the company will be able to raise the desired capital from companies and investors interested in participating.
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