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Celsius doesn’t have the money to pay users it owes $4.7 billion
Many of the crypto company's assets aren't liquids and has a hole of $1.2 billion in its books

Image depicting a wallet and cash lying

Celsius owes users $4.7 billion but doesn’t have the money to pay them.
Source: Business Insider India

On Thursday, July 14, crypto trading platform Celsius went on to file for Chapter 11 bankruptcy. Additionally, it had suspended all withdrawals from the month of June itself. As specified by reports, along with a bankruptcy filing, the company has a hole of $1.2 billion in its balance sheets. Reportedly, the users the platform owes money to might not get most of it back anytime soon.

In the bankruptcy filing, the crypto company lists liabilities worth $5.5 billion, along with $4.7 billion it owes to the users of Celsius. Turns out, the issue lies in the fact that in the filing, it only listed assets worth $4.3 billion, many of which are not liquid. Moreover, it is not even certain if the calculation of all its assets was accurate or not.

A significant part of the platform’s holdings is in its own crypto token, which is also called Celsius. Notably, this had ended up taking a nosedive last year. Alongside, assets approximately worth $1 billion are tied up in the bitcoin mining centre of the crypto company.

Rather notoriously, Celsius visibly offered high interests rates on crypto, such as 18% in certain cases. However, now it appears as if it has to make intensely risk bets to repay these bets. In the filing, the company cites bad gamble as the reason for losing all of the money.

“Some of Celsius’ crypto is tied up in long term and illiquid crypto deployment activities; some of Celsius’ crypto assets have been loaned to third parties…” the filing stated.

Additionally, it stated how much of its crypto assets were sold for the generation of cash, or pledged in support of borrowings. Essentially, the cash refers to what was used to gather Bitcoin mining equipment, and the GK8 storage business. Further it states how Celsius failed to meet user withdrawal, and give more collateral to support its obligation owing to the strategies it took part in. These assets deployment strategies includes the time frame and terms these strategies ‘lock’ the assets, and to the dip in the value of digital assets.

This filing specifies how users signing for Celsius all complied with the terms of service. Mainly, this enabled Celsius to simply halt withdrawals at any specific time. However, the filing does not show how much executives of the company in the last few years cashed out their crypto token. Alex Mashinsky, the co-founder and chief executive of Celsius, sold crypto worth $44 million since Celsius came into existence.

 

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