Zipmex a Victim of Crypto Contagion as Concerns Grow Over Babel Loan: Sources

Zipmex, the Singapore-based cryptocurrency exchange that froze withdrawals on Wednesday, is facing financial difficulties that link back to the troubled crypto lender Babel Finance, according to two industry executives briefed on the matter.

The Zipmex exchange launched in 2018, offering trading and investment services in Thailand, Indonesia, Singapore and Australia. On Wednesday, Zipmex tweeted that it was blocking customers from taking direct custody of their funds due to volatile market conditions and the resulting financial difficulties for its key business partners.

The backstory, according to an industry executive briefed on the matter by people with direct knowledge of the situation, is that a Singaporean arm of Zipmex faces a loss on about $100 million of funds lent through a product called "ZipUp" to the now beleaguered, Hong Kong-based Babel. Zipmex made the loan earlier, part of an effort to generate additional yield.

CoinDesk reported earlier this month that Babel, which froze withdrawals in June, was looking to hire the restructuring specialist Houlihan Lokey.

Jeff Zhao, a Babel spokesperson, told CoinDesk in a statement that "the loan business between Zipmex and Babel is far less than $100 million."

According to a press release in August 2021, Zipmex has an exchange and brokerage license in Thailand.

The person with knowledge of the matter said that the company was not permitted under the Thai license to reappropriate regular customer funds, but it could reinvest funds that were routed through the ZipUp product.

Zipmex has begun reaching out to investors in search of fresh funds, according to one executive who was contacted about the plan. Another person associated with Babel's restructuring confirmed that the company owes money to Zipmex.

A request for comment sent to Zipmex CEO Marcus Lim over LinkedIn had not been returned as of press time. Lim told the crypto news outlet Cointelegraph that the group "doesn't comment on rumors."

Babel Finance declined to comment on questions related to the Zipmex loan, or to provide any update on its own financial status.

Zipmex fundraising

Last year, Zipmex raised $41 million including an investment from the Bank of Ayudhya, one of Thailand's largest banks.

In June, The Block reported the U.S. crypto exchange Coinbase had been in talks to acquire Zipmex but ultimately agreed to make a strategic investment in the firm. According to the report, Zipmex opted to raise some $40 million of funds in an investment round at a $400 million valuation.

Despite this, Coinbase confirmed to CoinDesk Wednesday afternoon that they have no investment in Zipmex.

UPDATE (July 21, 15:23 UTC): Adds Babel spokesperson's comment regarding the size of its loan business with Zipmex.

Michael Bellusci contributed to this report.