Babylon Finance to Shut Down After Losing $3.4M in Rari Hack
Babylon’s announcement explains that the Rari hack started a “series of unfortunate events” they haven’t been able to recover from. The protocol will be shutting down in November of this year.
Why Babylon is Shutting Down
Babylon’s post makes an effort to recount the story of its rise and fall. While pointing out how they were usually in a reasonably strong position despite the adverse circumstances, it concedes that they were ultimately unable to recover.
Apart from announcing that the protocol will be shut down in November, the post details the immediate steps Babylon will take. These key actions will be:
Consolidate all remaining treasury holdings and distribute them amongst BABL and hBABL holders. The process will start on September 6th. All the details about the liquidation process will be shared later this week.
In order to prevent people from raiding the remaining liquidity, we are extracting all the liquidity from the Uniswap pool. The decision is pending to be ratified by governance.
The team will return all tokens — both vested and unvested. We have not sold a single token and we will not receive a penny from them.
Strategists will have until November 15th to close all the active strategies. No new strategies or gardens will be able to be created from the UI from today. The website and Discord will be shut down on November 15th.
Once and if the FEI reimbursement is completed, the team will still do all the work necessary to reimburse all the users that had funds in the gardens at the time of the hack.
All the code is open-sourced and the community is welcome to fork/clone and build on top of the Babylon project and/or token.
The announcement also details the ethical dilemma the team was facing due to their failure to recover from the hack. The key decision they made is to return all remaining assets to BABL and hBABL holders as they believe that cashing out would be unright.
Although most protocols/tokens never wind down and remain in a zombie state, we strongly believe that closing down is the only responsible route. Leaving the DAO in a zombie state is definitely easier and cheaper than closing down. It also has fewer legal complications. However, it is definitely not the moral or ethical thing to do.
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What happened during the Rari Hack?
This year has seen its fair share of crypto-related hacks and mishaps, with the FBI warning that more than $1 billion has been lost to these in Q1. Unfortunately for Babylon, the Rari hack was one of the bigger ones that rocked the markets in 2022.
Rari Capital was hacked in April with the consequence being the loss of around $80 million. Babylon was using Rari’s infrastructure to operate its lending platform and lost $3.4 million in the aftermath of the attack.
The situation was made worse when Rari reneged on an earlier claim that they will reimburse the losses suffered in the hack. This made a very unfavorable trifecta for Babylon as they lost a great deal of money due to the hack, had a lot of users withdraw their funds as a result of the loss, and had to go through this while the US is on the verge of a recession.
Do you think Babylon made the right decision? Let us know in the comments below.