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Cryptocurrency lender Celsius is on the verge of rapidly running out of money.
According to documents from the law firm Kirkland & Ellis filed on August 16, it is proven that Celsius will probably run out of money by October 2022. At the same time, the company also owes $2.8 billion more than it currently holds.
Celsius went bankrupt under Chapter 11 in July 2022 after a liquidity crisis in the crypto market forced the company to halt withdrawals. Since then, Celsius has worked its way through a process of restructuring and examining ways of paying creditors.
Early in the process, it emerged that Celsius was facing a loss of $1.2 billion on its balance sheet, with reported assets of $4.3 billion and liabilities of $5. $0.5 billion at that time.
– See more: A look back at the Celsius Network timeline
However, it now appears that the company’s financial situation has deteriorated. Celsius only has about $130 million in cash left. With all current operating, capital and restructuring costs, Kirkland & Ellis forecasts the company will be close to $40 million negative by October 2022.
The bigger flaw, however, lies in the company’s crypto holdings. Celsius reported a significant gap between its holdings and liabilities on record, amounting to a loss of $2.8 billion in crypto liabilities. The company owes $2.5 billion in Bitcoin (104,962 BTC) while it holds $348 million in Bitcoin (14,578 BTC) and $557 million in WBTC (23,348 WBTC).
In addition, Celsius holds $1 billion less ETH than it owes its users, even though 410,000 stETH is still owned by the company. USDC stablecoin loss also amounted to 700 million USD.
According to the filing, Celsius has 658 million CEL tokens in its reserve, which is the platform’s native token. Celsius owes customers 279 million CEL, leaving the company with a balance of 379 million.
Contrasting current market prices, CEL’s position would be worth close to $1 billion, more than double what is documented, as CEL has rallied more than 500% from a low of around $0.4. right when the company went bankrupt and at one point even reached more than 4.5 USD when it was reported that Ripple was considering buying Celsius assets to expand the company’s position. At press time, CEL is trading at $2.83.
However, the price increase did not help Celsius solve the balance sheet problem. Most of the CEL supply is locked on the platform and liquidity on exchanges is very low. If the company tries to sell CEL to offset some of the loss on its balance sheet, the price of CEL can quickly “dump” sharply and selling CEL will be very difficult.
As a result, Thomas Braziel, founder of 507 Capital, an investment firm that financed bankruptcy and restructuring, said:
“The portion of assets CEL holds may be worthless. Debts are still there because CEL holders will likely try to claim with as little damage as possible and claim $1/CEL.”
However, the figures were all filed ahead of the company’s second day of hearing, scheduled for the afternoon of August 16. A meeting of creditors will also take place on August 19, before which they were determined to prevent the company from selling Bitcoin. In a related development, Celsius has just been investigated by the Canadian authorities for being involved in the huge investment loss of the second largest pension fund in the country.
*Updated at 5:57 PM on August 16, 2022
On the afternoon of August 16, 2022, in the context of Celsius facing running out of money in the next 2 months, there was a shocking news related to the company’s top leader, Mr. Alex Mashinsky. According to the Financial Times, CEO Alex Mashinsky had a risky investment “gamble” in early 2022 that resulted in a rather heavy loss for Celsius before the company fell into a liquidity crisis in May 2022.
Alex Mashinsky took control of Celsius trading strategy months before bankruptcy https://t.co/AnydQiZLCC
— Financial Times (@FT) August 16, 2022
Specifically, in January 2022, CEO Alex Mashinsky gathered his investment team to tell them that he would take control of Celsius’s trading strategy. Because the market was relatively bad at that time, facing the Fed’s inflation meeting, Mr. Mashinsky ordered the sale of hundreds of millions of dollars in Bitcoin to hedge and reduce risks. This means that CEO Celsius believes the Fed will raise interest rates and crypto is hit hard.
However, contrary to his prediction, the Fed decided to keep interest rates unchanged in January 2022 and Mashinsky “corrected” the mistake by buying back the Bitcoins he had just sold at a higher price.
Celsius, on the other hand, involves a large investment in the Grayscale Bitcoin Trust, the world’s largest Bitcoin fund with the ticker symbol GBTC, providing investors with an index-trackable tradable product. price of Bitcoin.
Celsius bought into GBTC when the stock was trading for more than the underlying Bitcoin in the fund. By September 2021, Celsius held 11 million GBTC, then worth about $400 million, but traded at GBTC Premium 15% below the market price of Bitcoin.
In the same month, Celsius was offered a deal to exit a GBTC investment position that would have cut losses for the company, but Mashinsky blocked this, arguing that GBTC Premium could rise again in the months after. However, the situation got worse.
From -15%, GBTC Premium has continued to drop more than 10% in April 2022 to -25%, Celsius completely failed. According to a source familiar with the matter, Celsius’ total losses in the GBTC transaction are around $100 million to $125 million.
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