Kategorie: Crypto Markets

Babel’s losses included 8,000 BTC and 56,000 ETH wiped out in unhedged proprietary trading positions, a proposal deck cited in a recent report detailed.

Babel Finance, an embattled crypto lender that froze customer withdrawals in June amid the crypto market crash, reportedly lost over $280 million of its customers’ funds in bad trading bets, The Block reported citing the crypto company’s restructuring proposal deck.

Per details in the proposal, the Babel Finance’s losses came via proprietary trading of 8,000 bitcoin (BTC) and 56,000 ether (ETH). The failed bets happened last month as the platform faced liquidation amid massive deleveraging across the crypto market.

The firm says in the deck that as BTC price plunged from $30,000 to $20,000, unhedged positions “chalked up significant losses, directly leading to forced liquidation of multiple Trading Accounts.” 

It’s these accounts that wiped out approximately 8k BTC and 56k ETH worth over $280 million in customer funds.

Capitulation and restructuring plans

Babel’s capitulation spiraled as its lending and trading units failed to meet margin calls – and no customer funds to continue honouring withdrawals.

Trouble hit not long after the financial services provider raised $80 million in its Series B financing round in May. The financing, secured at a valuation of $2 billion, saw investments from Jeneration Capital, BAI Capital, 10T, Circle Ventures and Dragonfly Capital among other investors.

The market downturn and the proprietary trading failure has Babel Finance trending alongside other troubled crypto firms like Voyager Digital and Celsius Network, which have both filed for bankruptcy. 

The collapse of crypto hedge fund Three Arrows Capital (3AC) and the contagion that followed only heightened the uncertainty.

As part of its restructuring plans, the Babel team is looking to convert $150 million of its largest creditors’ debt into convertible bonds. The lender also seeks to add to its survival kit $250 million to $300 million via convertible bonds, with further funds likely to come from a $200 million revolving credit facility.

The plan, per the proposal deck, is to ultimately incorporate Babel Finance’s major creditors as shareholders.

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The FDIC says the public should note that deposit insurance does not cover non-bank entities and non-deposit products, including stocks and cryptocurrencies.

The Federal Deposit Insurance Corp (FDIC), an independent US agency that insures deposits and helps protect customers in case of given bank failures, has released a clarification message for crypto investors concerning its mandate.

In a fact sheet released on Friday about the FDIC deposit insurance and crypto companies, the agency warns the public that claims crypto deposits being insured are inaccurate.

Per the agency, some cryptocurrency platforms have “misrepresented” information concerning crypto products and their eligibility for FDIC deposit protection.

“These sorts of statements are inaccurate and can cause consumer confusion about deposit insurance and harm consumers under certain circumstances,” the Fact Sheet noted, making it clear that crypto isn’t FDIC-insured. Specifically, the deposit protection doesn’t cover failed non–bank entities, such as crypto companies.

The Fact Sheet also states that “deposit insurance does not protect consumers with non–deposit products such as stocks, bonds, mutual funds, securities, commodities, or crypto assets.”

In good and bad financial times, one thing remains the same: your money up to $250,000 is protected at FDIC-insured financial institutions. Since 1934, no FDIC-insured depositor has lost a penny of their insured funds. https://t.co/059yrVwiiH pic.twitter.com/iSP2OZEO08

— FDIC (@FDICgov) July 29, 2022

Non-bank deposits and an insured bank’s products

An FDIC advisory also sought to clarify that while it offers depositor protection to insured banks’ customers, the same does not extend to a non-bank entity or the customers even if the entity offers products via a depository-insured bank.

“In dealings with crypto companies, FDIC-insured banks should confirm and monitor that these companies do not misrepresent the availability of deposit insurance,” read the advisory.

The FDIC’s message to the public follows developments with the bankrupt crypto lender Voyager Digital.

The crypto company, which had some customer deposits with an FDIC-insured bank (the Metropolitan Commercial Bank) has been asked not to misrepresent facts about deposit insurance to its customers.

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CoinFLEX co-founders Sudhu Arumugam and Mark Lamb say the goal is to be lean staff-wise and to remain ‘right-sized’ should potential acquisition proposals come in.

Crypto exchange CoinFLEX has announced that it has cut its headcount by a significant number amid ongoing efforts to bring the embattled company back to its feet.

The exchange, which is in a tussle with one of its customers over an unpaid loan said to be about $84 million, says the move to lay off so many of its staff members is informed by the need to be lean “staff-wise” as they navigate the murky waters they found themselves in June.

“The staff cuts and non-staff costs that we have made will reduce our cost base by approximately 50-60%. The majority of the team that remain are focused on product and technology, which remains the core of our business,” the exchange’s co-founders Sudhu Arumugam and Mark Lamb wrote in a blog post.

Remain ‘right-sized’ for any potential acquisition

According to the co-founders, the layoffs touched almost every section of the platform’s operations and impacted employees across various geographies.

The company will, however, continue to monitor its costs even as they target efficiency, with plans to start scaling on the staff once business hit levels where volumes permit hiring.

In the meantime, CoinFLEX intends to “remain right-sized for any entity considering a potential acquisition of or partnership opportunity.”

CoinFLEX announced partial customer withdrawals had resumed mid this month following a freeze that had also hit major crypto lender Celsius Network and other beleaguered crypto firms amid market woes in a biting crypto winter.

Other big casualties of the market contagion are Three Arrows Capital, Vauld, Voyager Digital and Zimplex.

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US Securities and Exchange Commission (SEC) Chair Gary Gensler has severally pointed out that cryptocurrency exchanges and trading platforms cannot be treated differently from traditional stock exchanges.

And amid the increased regulatory spotlight on crypto, helped by recent events, the SEC boss has renewed that call.

In a video he shared on Twitter, Gensler says crypto platforms will better protect customers – and see further growth as a result – if they embrace regulatory compliance.

According to Gensler, digital asset platforms (like regulated stock markets) can help protect millions of users against aspects such as “manipulation, fraud and front running,” if they are registered and properly regulated.

“With so many retail customers trading on crypto platforms, we should make sure that those platforms offer similar protections,” he noted, adding that SEC staff have been mandated to pursue registration of these crypto platforms. The key, he explained, is to ensure the exchanges are regulated as securities platforms where appropriate.

We have rules in our capital markets to safeguard market integrity & protect against fraud & manipulation. If a company builds a crypto market that protects investors & meets the standard of our market regulations, people will more likely have greater confidence in that market. pic.twitter.com/ZxdBfvmqXP

— Gary Gensler (@GaryGensler) July 28, 2022

Conflict of interest?

Gensler also pointed out that with crypto exchanges also acting as market makers, potential conflict of interest could harm investors. As such, he has asked staff at the securities watchdog to find what’s possible with regard to “segregating out” the market making functionality from the digital asset platforms.

If the traditional exchanges don’t do this – market making – why should crypto platforms be any different?

“Look, there’s no reason to treat the crypto market differently, just because a different technology is used,” he pointed out. 

Gensler’s comments come days after he reiterated the need to have crypto exchanges and lending platforms offer more disclosures as part of basic consumer protection. They also come amid reports the SEC is investigating crypto exchange Coinbase over the listing of securities tokens.

Coinbase refutes these claims and alongside several industry players, say the agency is engaging in “regulation by enforcement.”

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In an announcement today, Binance, the world’s largest crypto exchange by daily crypto trading volume, said that it had successfully integrated the TrueUSD (TUSD) TRC20 Network on its platform. 

An example of a cryptocurrency that uses TRC20 or USDT-TRON standard is Tether’s USDT that is launched on the TRON blockchain network.

According to the announcement, the  TrueUSD (TUSD) TRC20 Network integration will allow Binance to support TRC-20 tokens for deposits as well as the withdrawals of USD Coin (USDC) and Tether (USDT).

The integration further means that USDC and USDT will need 20 block confirmations; something that will require about one minute. 

With its cheaper transaction fees and faster transaction times as compared to the other stablecoins on other blockchains, TRC-20 stablecoins have had a great impact on the crypto market since their launch.

Binance regular upgrades

Binance has been constantly updating its trading platform with new features that are ideal for its users with TRC-20 being the latest update. 

Early last week, Binance integrated STEPN (GMT) ERC20 allowing users to use the token for deposits and withdrawals.

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