Celsius Network reveals $1.2bn shortfall in bankruptcy filing


Celsius Network reveals a $1.2bn shortfall in the bankruptcy filing

Crypto lender Celsius Network's bankruptcy filing has revealed some unpleasant surprises about the state of the crypto lending platform, including User deposits made up the majority of the $1.2 billion shortfalls, which was brought on by what CEO Alex Mashinsky called "bad" investments and other "unanticipated" losses.

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According to a chapter 11 bankruptcy petition that Celsius CEO Alex Mashinsky approved on July 14, the business has around $4.3 billion in assets versus $5.5 billion in liabilities, or a $1.2 billion shortfall.

The majority of the company's liabilities, $4.72 billion in user deposits, were offset by assets, including $600 million worth of CEL tokens, $720 million in mining assets, and $1.75 billion in cryptocurrency.

Some members of the crypto community have expressed doubt about the CEL tokens' worth, despite the fact that their combined market valuation is barely $321 million, according to statistics from CoinGecko.

410,421 Lido Staked ETH (stETH) tokens worth $479 million and yielding 5% APY are included in the crypto assets, but the tokens themselves cannot be exchanged for Ether (ETH) until the Ethereum network switches to Proof-of-Stake consensus in the Merge.

According to a letter signed by Celsius CEO Alex Mashinsky, the firm may also sell Bitcoin (BTC) produced by its Celsius Mining Bitcoin mining operation in order to "create sufficient assets" to pay off at least one of its debts and generate future revenue for the business. By 2023, the business anticipates producing around 15,000 BTC.

Cory Klippstein, the founder of Swan Bitcoin, has criticized Celsius and Voyager for choosing Chapter 11 protection over the Securities Investor Protection Act recently (SIPA).

When a firm files for protection during a Chapter 11 bankruptcy, it asserts ownership of all assets. A bankrupt company must either transfer its accounts to another company or be liquidated and distribute the proceeds to investors under SIPA.

Frances Coppola, an economist, and writer who rejects cryptocurrency wrote about why she thinks Celsius investors "won't receive their money back" in a blog post on July 14.

She contends that Celsius is operating what she refers to as a "shadow bank," which is a non-bank "unregulated financial intermediary," according to Investopedia.

"Bank deposits aren't even considered "client assets," much less "assets under management. They are bank loans that are not guaranteed. As a result, they are the bank's obligations and are totally exposed to risk.

"Bank depositors are not legally entitled to receive their money back. "The bank can refuse to enable consumers to withdraw their funds if it doesn't have the cash to pay them, even though the conditions of the account specify that they can do so whenever they want," she said.


Coppola further mentioned that it is made plain in Celsius's terms of service that the company is free to "deal with as it pleases" with consumer deposits of money.

Additionally, it states clearly that clients may not receive all or part of their money returned in the case of bankruptcy.

CEL has been declining since January, plummeting 84% from $4.38 to $0.73, with a peak in June timed to the community's attempt to short squeeze the stock.


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