Leaked Audio Suggest Babel May be Leveraging User Funds

Oct 2, 2020 at 00:00 UTCUpdated Oct 2, 2020 at 09:23 UTC.Leaked recordings of a private conversation suggest crypto lender Babel Finance leveraged some user funds to long bitcoin and faced potential default risks during this year's Black Thursday market crash in March.

Fm by an anonymous Twitter user on Sept. 25 but were soon taken down by the platform after Babel filed complaints.

The new recordings suggest the conversations happened around March 20.Founded in 2018, Babel Finance is registered in Hong Kong with operations based in China.

According to the leaked recordings, Babel also bet that bitcoin's price would rise and leveraged both its own and some customer funds to long bitcoin, which faced potential default risks during bitcoin's 60% crash six months ago.

Babel declined to elaborate on X Plan or comment specifically on the usage of NGC's funds in the beginning, claiming information with its customers is confidential.

The reality appears to be muddier because Babel didn't exactly draw a fine line between its own assets and user funds, according to Wang in the recording.

"The situation of Babel using customers' funds to trade crypto doesn't exist," the firm claimed in the statement.

The sudden drop led to a severe devaluation of Babel's collateral at its capital sources, to the extent that its collateral at Tether at one point was worth below 80% of what Babel had borrowed from the USDT issuer, people familiar with Babel's operations told CoinDesk.

To gain Tether's trust for that, Babel even proposed to pledge some of its equity to Tether, which declined the offer but took Babel's words, according to email exchanges reviewed by CoinDesk between the two parties just days after the market crash.

"Essentially, at that very moment, Babel was in debt to both its customers as well as its capital sources," the people said of the risks Babel endured at the time.