From $25 billion to $167 million in 9 months

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2022-07-24 13:24:08

Celsius filed for bankruptcy last week, sending the market into turmoil. Once likening itself as an alternative to “traditional banking”, attracting a large amount of customer assets, everything here seems to be over. Although everything was planned, the fall of Celsius was still a huge incident in the industry.

In October 2021, CEO Alex Mashinsky said that the crypto lending company was managing $25 billion in assets. Even as recently as May, despite a sharp drop in the price of digital assets, the company still said it was managing about $11.8 billion. The company also has $8 billion in customer loans, making it one of the biggest names in the cryptocurrency lending market.

Currently, Celsius is only 167 million USD in hand. With this amount, Celsius claims it will be enough to “provide ample liquidity” to support operations during the restructuring.

Meanwhile, Celsius owes its users about $4.7 billion according to its bankruptcy filing. In addition, there was a $1.2 billion loss on the balance sheet.

Celsius’s demise marks the third biggest bankruptcy in the crypto ecosystem in two weeks, and it’s also marked as a Lehman Brothers moment. Experts compare the ill effects of a failed crypto lender to the collapse of a major Wall Street bank that ultimately caused the 2008 financial crisis.

Regardless of whether Celsius has a greater knock-on effect on the entire crypto ecosystem, the day when customers reaped double-digit profits is over. With Celsius, the fact that they promised large profits to attract new users was part of the eventual downfall.

“They subsidize and take losses to earn clients. That return is ultimately fake. They make money from the Ponzi scheme basically.”


3 weeks after Celsius stopped all withdrawals due to “extremely difficult market conditions” and a few days before the company finally filed for bankruptcy, the platform still advertises with the words is stamped on the website with an annual interest rate of nearly 19%, paid weekly.

“Transfer your digital currency to Celsius and you can get up to 18.63% interest in minutes”.

Such promises quickly attracted new users. Celsius says it has 1.7 million customers as of June.

The company’s bankruptcy filing shows Celsius also has more than 100,000 creditors – one of whom lends the platform cash without any collateral at all. The list of 50 creditors includes Sam Bankman-Fried trading firm Alameda Research as well as a Cayman-based investment firm.

These creditors are likely to be the first to get their money back, while retail investors will have to wait.

After the bankruptcy petition was filed, Celsius stated that “most account activity will be suspended until further notice” and that it “does not require the authorities to allow customers to withdraw funds at any time.” this”.

The client will also not receive the bonus accrued during this time.

This means that customers are trying to withdraw their funds from here is completely impossible. They also don’t know if the bankruptcy process will allow customers to get their lost money back. If there’s some sort of payment in the end, it’ll probably take a few years. And there is currently no answer as to who will be the first to receive it.

Unlike the traditional banking system, which must insure customer deposits, there is no normal customer protection in the event of Celsius failure.

Celsius states in their terms and conditions that any digital asset transferred to the platform constitutes a loan from the user to celsius. Since there is no collateral, client funds are essentially just unsecured loans to the platform.

Also in Celsius’s terms there is a warning that in the event of bankruptcy, “all assets in the Earn Service or Borrow Service are irretrievable” and that the customer “does not have any legal way or right to end the business.” connected with the duty of Celsius”. The document shows that Celsius is mass exempt from wrongdoing, if things go wrong.

Another popular lending platform that also offers retailers high interest rates is Voyager Digital, which has 3.5 million users and also recently filed for bankruptcy.

To reassure his millions of users, Voyager CEO Stephen Ehrlich tweeted that once the company settles the bankruptcy process, users will be eligible for funds, including an amount of crypto in their accounts. them, and also Voyager tokens. However, it is currently unclear if the Voyger token is still valid.


The problem that surrounds all of Celsius is that the almost 20% interest rate they offer their clients is not real.

In one lawsuit, Celsius was accused of operating a Ponzi scheme – paying out previous users with money from new users.

Celsius has also invested in other platforms that offer similarly high returns to keep the business afloat.

A report from The Block shows that Celsius has at least half a billion USD invested in Anchor – the leading lending platform that failed with the TerraUSD project. Anchor promises investors a 20% annual rate of return — a rate that analysts say is unsustainable.

“They’re always looking for a source of profit, so they move assets around into risky vehicles where they can’t hedge,” said Nik Bhatia, founder of Theo bitcoin Layer and professor. at the University of Southern California.

Worth mentioning, Celsius is not the only case. Cracks continue to spread throughout the nooks and crannies of the cryptocurrency market. Castle Island Venture’s Carter says the effect of all this is that trust has been destroyed, standards are tightening and solvency has been tested so people are fleeing applications. digital money lender. 20220719163650471.chn

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