Celsius Bankruptcy: Celsius Reveals $1.2B Hole in Balance Sheet

07/15/2022By: L, Laura

Crypto lender Celsius has revealed a $1.2bn hole in its balance sheet resulting from what CEO called “poor” investments and other “unanticipated” losses.

 

The news comes after the troubled crypto lender filed for Chapter 11 bankruptcy protection on Wednesday.

 

Celsius Network, the liquidity-strapped crypto lending platform that paused withdrawals, has a $1.2 billion hole in its balance sheet, according to a new court filing by the firm’s advisory partner, Kirkland & Ellis.

 

The document, which was filed to the U.S. Bankruptcy Court of the Southern District of New York, shows that Celsius holds $4.3 billion of assets and $5.5 billion of liabilities. In its list of assets, Celsius claimed it has about $600 million in its CEL token. However, the company noted in the filing the total market cap for CEL as of July 12 was roughly $170.3 million.

 

Celsius is one of several firms that have been hit hard by the ongoing liquidity crisis in the crypto sector. It halted deposit withdrawals on June 12, hired restructuring experts to advise on its financial situation and filed for bankruptcy protection on Wednesday.

 

As the firm was looking for solutions to its financial difficulties, crypto exchange FTX reportedly walked away from talks about a potential deal to acquire Celsius, pointing to a “$2 billion hole” on Celsius’s balance sheet.

 

However, Celsius started to make good on its debt to decentralized finance (DeFi) protocols Aave, Compound and Maker as part of a treasury-management maneuver to get a hold of its assets locked up as collateral of the loans.

 

The crypto lender paid off $223 million to Maker, $235 million to Aave and $258 million to Compound, closing its last loan on Tuesday, as reported by CoinDesk.

 

As a result, the firm was able to reclaim almost $1.4 billion in tokens, mostly held in the form of wrapped bitcoin (wBTC) and a type of staked ether derivative (stETH).

 

Ryan Preston Dahl, a restructuring expert at the law firm Ropes & Gray LLP, said that Celsius will be entering “uncharted territory” in filing for Chapter 11 bankruptcy protection, because there has not been a precedent for a cryptocurrency broker “trying to navigate through a reorganization as opposed to a liquidation.”

 

Related Reading:

What Happens If Crypto Exchanges Such as Celsius or Coinbase Goes Bankrupt?

Behind Voyager Failure: How Crypto Broker Went Bankrupt Like a Bank?