High Court rejects US$5m claim against Babel Finance co-founder over crypto fund collapse
Parastate Labs' investment was wiped out during a mass liquidation of Babel's trading accounts in 2022
A cryptocurrency investor seeking US$5 million from Babel Finance co-founder Wang Li lost his case in the High Court, with the court rejecting claims of dishonest assistance in a breach of duty. Wang was responsible for Babel Finance's trading strategies and did not help prevent the liquidation of the company's accounts in 2022.
After Babel's insolvency, Parastate Labs, a U.S.-based cryptocurrency investor, lost its five million USDT investment, which was locked for three months. In June 2022, Deribit, a cryptocurrency derivatives exchange, demanded Babel deposit more Bitcoin and Ether to cover a liquidity shortfall. Babel deposited 200 Bitcoin but was still liquidated less than an hour later, wiping out about US$12.5 million in investments.
Wang tried to negotiate with Deribit to return control of Babel's accounts, but Deribit consolidated them and liquidated the trading positions, resulting in a deficit for Babel's customers. The court ruled that Wang did not breach fiduciary duties or act dishonestly, as Parastate was a seasoned investor with legal counsel and understood the risks involved.
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