Celsius Bankruptcy Filing Disclosed Countless Bad Deals: buy $750m worth of rigs, $840m Debt from Tether was liquidated
According to documents filed with the U.S. Bankruptcy Court for the Southern District of New York by Celsius Consulting Partners Kirkland & Ellis, detailed information about how the company with 1.7 million users went bankrupt has been widely disclosed.
As of July 2022, Celsius had 1.7 million registered users and 300,000 active users with balances over $100, paying approximately 5% of financial rewards. celsius had 23,000 retail borrowers with 411 million loans outstanding and 765 million collateral; the company had 47 institutional borrowers with 93 million loans outstanding and 98.5 million collateral The company has 47 institutional borrowers with $93 million outstanding and $98.5 million in collateral.
The documents show that Celsius holds $4.3 billion in assets and $5.5 billion in liabilities, or a shortfall of $1.2 billion. Of that amount, only $780 million is in non-fundable assets. FTX had previously considered acquiring Celsius, but dropped it after looking at its financials, saying it believed Celsius had a $2 billion hole in its balance sheet.
Celsius invested a significant amount of its customer funds ($750 million line of credit) in its own mining operations and had $576 million outstanding at the end of May, the filing shows. It currently has 80,850 mining rigs, with 43,632 in operation. It is worth noting that most of Celsius’ mining rigs were purchased in 2021 and the prices of these rigs are currently dropping significantly by more than 50%.
In 2021, a mistake by Eth2 staking service provider StakeHound resulted in the loss of over 38,000 ETH from Celsius.
Due to the quick withdrawal of the UST, Celsius lost a relatively small amount of money in the LUNA crash, only $15.8 million. However, the market rumors about LUNA caused a run on Celsius as over $1 billion was withdrawn in 5 days.
Celsius provided two loans totaling $75 million to 3AC, and when 3AC failed to satisfy the additional guaranteed metals requirement, Celsius liquidated the collateral owned by 3AC, incurring a loss of $40.6 million.
Tether provided a loan of up to $841 million to Celsius. In liquidation Celsius incurred a loss of $97 million. At the time of March 12,2020, Tether had given PayPal more than the usual amount of time to keep paying back the loan. But in this fall, Tether apparently went straight to liquidation without playing the “white knight” again.
From 2019 to 2021, Celsius borrowed money from a private lending platform, but when Celsius tried to repay the loan in 2021, the other party said it could not repay the collateral. As a result, the lender owes Celsius $361 million and 3,765 bitcoins. The documents do not disclose the name of this platform.
The filing says: In particular, despite the Company’s directive to engage in only market neutral exchange deployments, certain asset deployment decisions were made in the midst of its unexpected asset growth that in hindsight proved problematic. Although the Company took the necessary steps to “unwind” these deployments, unfortunately, the damage was done.
Quote from @wassielawyer: Comparing the declarations filed by Voyager and Celsius — I am far more bullish on Voyager’s management. Voyager made one huge mistake (3AC Loan) and owned it. Celsius made a series of crap trades and essentially blamed price go down and bad press for their current predicament.