Experts spoke about the current problems of the Celsius crypto platform and shared their views on its immediate prospects
Alex Mashinsky, Nyuk Goldstein and Daniel Leon launched the Celsius Network in 2017. This is a centralized cryptocurrency platform, the main services of which until recently were the provision of loans and deposits. The company has issued loans totaling more than $8 billion, and as of June 2022 it had 1.7 million customers.
Now the company is in the process of bankruptcy, is conducting legal proceedings and does not have the means to pay debts to creditors. Over the past 10 days, the price of the native token has fallen by more than 70%.
What’s wrong with Celsius
Back in early summer, the market started talking about problems with liquidity on the platform, but Alex Mashinsky refuted them. However, on June 13, Celsius suddenly announced the suspension of withdrawals “to protect the community” and “due to extreme market conditions.”
After this announcement, the price of bitcoin decreased by 12%, the native CEL token of Celsius fell by a third, and the total market capitalization of cryptocurrencies fell below $1 trillion for the first time since January 2021.
In July, Celsius cut 150 employees, hired outside lawyers and filed for bankruptcy (restructuring) in court. The company’s management has not commented on the situation for a long time.
Later, from court documents, it turned out that the company’s assets amount to about $ 4.3 billion, and liabilities — $ 5.5 billion. However, in mid-August it turned out that the gap was already $2.85 billion.
Mashinsky admitted that the reasons for this were incorrect investment decisions, but blamed it on a former partner, the company KeyFI. Shortly before that, KeyFi sued Celsius, accusing the company of non-payment of funds due under the contract.
Things are really bad for Celsius, warns partner, head of the practice of FinTech & Crypto law firm DRC Mikhail Bystrov. A significant shortage of funds to cover debts, bankruptcy proceedings, an attempt by Alex Mashinsky to shift responsibility to KeyFi Inc. due to alleged incompetence in the field of crypto investments, mass discontent of users – after such a business usually does not recover, the lawyer believes.
He noted that Mashinsky himself caused a scandal with his statements that everything was fine with the company at the moment when it was already going down. However, the situation is even worse for Celsius customers, the expert is sure.
The restructuring plan proposed and actually approved by the bankruptcy court, which involves the use of the mining division for payments to creditors, leaves hope for a happy ending, says Aaron Chomsky, head of the ICB Fund investment department. However, in his opinion, there are serious doubts that these forward-looking estimates are correct.
The expert drew attention to the fact that the “hole” in the balance of Celsius after the revision increased from $1.5 billion to $2.85 billion. The leadership of the platform was caught in attempts to “embellish reality”, questions have already appeared from the US authorities, Chomsky noted.
He added that in the event of a resumption of the fall in the prices of cryptocurrencies, the company will use up the remaining cash reserve until October (this period was mentioned in court documents).