Decentralized asset management protocol Babylon Finance announced the project is shutting down in November, citing its failure to recover from a $3.4 million exploit on a lending service it launched on Rari Capital.
“Despite our efforts, we haven’t been able to revert the negative momentum caused by the Rari hack. Market hasn't helped,” Babylon founder Ramon Recuero said on Twitter on Wednesday.
Babylon's founder added the team had run out of funds needed for expenses, forcing it to shutter the project altogether.
“For the last few months, the team has been working without a salary trying to find ways to get back on track with our previous TVL [total value locked] growth,” Recuero said. “Our biggest mistake was not raising enough money,” he added.
The Rari connection
Babylon Finance is described as a decentralized asset management protocol in which a community of users can make collective investment decisions. However, Babylon’s operations were dependent on another decentralized finance (DeFi) platform called Rari Capital. Babylon used Rari Capital's infrastructure to create lending markets called Fuse.
In February, the Babylon team launched lending markets on Rari Capital’s Fuse platform, where it had asked users to deposit BABL tokens as collateral and borrow assets from it. Babylon managed $10 million of assets across these pools.
In April, Rari Capital was hacked for more than $80 million in crypto assets held within the Fuse lending pools. These assets belonged to various DeFi projects that relied on Rari's infrastructure, Babylon being one of them.
During the incident, the Babylon team lost $3.41 million of assets. A double blow came when the incident prompted users to withdraw additional collateral, resulting in Babylon’s assets under management dropping from $30 million to $4 million in the following days.
Rari had initially promised to reimburse the funds lost in the hack but later canceled the plan. This cancellation, the Babylon team says, further hampered its chance to recover from its financial troubles. Soon after the hack, the native governance token BABL also took a nosedive of 75%, going from $20 to $5 amid a broader market downturn. The falling token price affected the value of its treasury, the team says.
Jack Longarzo, a core contributor of Rari Capital, did not immediately respond to The Block's request for comment on Babylon's allegations.
In the last 24 hours, the BABL token has dropped another 92%, crashing from $5 to $0.40 on the news, per CoinGecko data.
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