Celsius Bankruptcy Reveals $1.2 Billion Black Hole

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  • Celsius’ bankruptcy filing shows a $1.2 billion black hole in its accounts
  • The lending platform was owed hundreds of millions by more than one crypto entity
  • Alex Mashinky admitted that the company made “certain poor asset deployment decisions”

The issues at Celsius have been laid bare as the company’s bankruptcy filing revealed that the company has a $1.2 billion shortfall. The 61-page bankruptcy filing was pored over by media outlets and creditors alike, and the numbers were startling. Due to a series of bad bets, unpaid loans, and a bank run that CEO Alex Mashinsky blamed on media “misinformation”, the company was left in a perilous position, exacerbated by the onset of the bear market. The filing now offers a clear explanation of where Celsius’ money went, and also puts new pressure on Mashinksy himself.

“Certain Poor Asset Deployment Decisions”

Celsius filed for bankruptcy yesterday and the filing became available to the public overnight. It revealed that Celsius has liabilities of $5.5 billion, $4.7 billion of which is Celsius users, and assets of just $4.3 billion. This left a $1.2 billion black hole in the company’s balance sheet, some 17 times more than the $70 million that Voyager owes.

The huge debt was blamed on a mixture of bad bets, the onset of the bear market and a failure to manage its rapid growth, as CEO Alex Mashinsky acknowledged:

The amount of digital assets on [Celsius’s] platform grew faster than the company was prepared to deploy. As a result, the company made what, in hindsight, proved to be certain poor asset deployment decisions.

Among other catastrophes endured by Celsius were:

  • A $510 million loss when a lender could not return the collateral that Celsius had put up for a loan
  • A $94 million loss when collateral it had pledged to secure a loan from Tether was liquidated by mutual agreement.
  • A $40 million loss when Three Arrows Capital was unable to repay a loan from Celsius

These numerous and hefty losses explain why FTX allegedly passed on a chance to buy Celsius at the end of June, pointing out what it saw as a $2 billion hole in the company’s accounts.

Mashinsky Turns to Bitcoin Mining

Mashinsky said in the filing that about $1 billion of Celsius’s funds are illiquid as they had been committed to the company’s bitcoin mining operation or invested in the Ethereum 2.0 staking contract. He suggested Celsius’s recovery plan could involve using BTC generated from its mining operations to “address its current cryptocurrency deficit”.

However, according to reporter Colin Wu, Celsius’ mining operation used hundreds of millions in borrowed funds to buy up mining equipment, something that has sent other companies to the brink of bankruptcy:

More Lawsuits Inevitable

Celsius and Mashinksy are already facing one lawsuit from a former fund manager, but a class action lawsuit from investors is inevitable, with discussions already starting about how to proceed with one.

Much of the anger is directed at Mashinksy personally, who continued to trash talk critics on Twitter and talk up the performance of the company, imbuing customers with false belief that their funds were secure.

Mashinksy is known for his ‘banks are not your friends’ t-shirt and his Robin Hood persona, but now he is in the inevitable position of being seen as the man who not so much stole from the rich to give to the poor as took from everyone and went to the casino.