Deciphering Celsius’ bankruptcy filing: how many bullets it has left now

“You have a disease, and you will be afraid if you die.”

In good times, the symptoms are ignored, and in bad times Celsius files for bankruptcy.

The time came to July 15, Celsius has filed for bankruptcy in the New York court. The entire filing is 61 pages long and describes in detail Celsius’ current financial situation, main business, list of creditors and reasons for filing for bankruptcy.

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Image source: https://coinquora.com/

For most of the domestic and foreign people who eat melons, their cognition of Celsius is only on a thunderous platform “mainly engaged in crypto asset lending business”, and they may know little about the details. And the best way to understand how it went from brilliance to bankruptcy may be to listen to what it has to say — especially what it has to say before the law.

Because this bankruptcy filing puts the ugly front first: I will be punished voluntarily for perjury.

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Given that this bankruptcy application is very long, I am afraid that few people with unrelated interests are willing to read it from the beginning to the end. I will digest it here and extract some key information for interpretation.

In the past, it seems to have stepped on the air?

The bankruptcy filing begins with Celsius expounding on its “brilliant” past:

The product was launched in 2018, and at the end of the year, crypto assets worth 50 million U.S. dollars were deposited by users on Celsius’ platform; in 2019, this figure reached 200 million U.S. dollars; in March 2021, this number exceeded 10 billion U.S. dollars.

This splendid exposition of the past seems to be somewhat intriguing. The amount of crypto assets on the platform denominated in fiat currency is constantly expanding. Is it because Celsius has done a good job to expand more users, or because the bull market has blown up asset prices?

The picture below reveals the answer. Celsius seems to be perfectly on the right track for the appreciation of crypto assets. From 2018 to March 2021, it was the period of big bulls. At that time, BTC was still a correct belief that devout believers must mention. Therefore, there is a high probability that the encrypted assets on the platform have appreciated by themselves. And the appreciation has brought higher borrowing income, and the song and dance have risen. For a time, the inflow of encrypted assets on the Celsius platform was far greater than the proposed

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Data source: Statista.com

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Celsius’ asset inflow and outflow

Comparing user numbers is another story. Clause 9 of the bankruptcy filing said Celsius had 1.7 million registered users as of July. Then it may have fewer users last year. APPs with millions of users may be everywhere in the domestic traditional Web2 mutual gold field. From a traditional perspective, the number of users is not large; but in the field related to Web3, capital obviously favors the potential of Clesius. According to Section 8 of the bankruptcy petition:

In October 2021, 115 million acquired GK8, an Israeli company that cold-stores encrypted assets; in December, the B round of financing ended, raising 600 million, with a valuation of 3 billion (USD); as of May this year, it has raised almost 6.9 billion.

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Rich is real rich. Then Celsius plans to expand its business even further, and if it weren’t for the sudden thunderstorm, it is also preparing to set up a mining company called Celsius Mining and conduct an IPO. At the same time, it may reveal the wealth password of B-side and institutions: to engage in bank-like lending business and mining business.

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However, cracks under the brilliance are also produced at any time. Affected by the global epidemic and the LUNA incident, the crypto winter has arrived, and digital assets have depreciated rapidly. Everyone knows what happened later. Celsius lent or pledged platform assets in certain agreements, but the bankruptcy of creditors and the decline in the yield of the agreement made it face serious risk exposure, and end-user confidence declined and demanded to withdraw coins. Celsius suffered a run and was unable to cope.

Interestingly, in the bankruptcy filing, Celsius attributed these to “unexpected global events” and “negative reports and misinformation on Celsius social media”. This sounds like a scapegoat: when the wind is down, you can carry all the limelight, but when the wind is up, it’s all about others? Or the same old question: Where is Celsius’ own risk control? Where is the acuity for identifying the air nature of certain protocols (eg Anchor20% annualization)?

Or all this points to the stubborn problem of Cefi that we are more reluctant to admit: the security of user assets is never the first (on the surface), and the fluke and high returns of other protocols are the first.

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Now, how many bullets does it have?

How much money does Celsius have? Or, how much does it still owe? Judging from the latest balance sheet disclosed in the bankruptcy filing, this shortfall is about $1.2 billion.

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Note: The unit of the balance sheet is millions, 1190 million is 1.19 billion

Part of the money owed is related to its main business financial services, which is easily perceived by the users of the brand: for example, the well-known stETH, the spillover effect of the bankruptcy of Three Arrows, the thunderstorm of LUNA, etc., among which there are also mentioned above. A dark card arrived that was ignored: mining operations.

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Celsius operates one of the largest U.S. mining companies, according to the bankruptcy filing. In order to promote the growth of the company’s future earnings and obtain greater yields, Celsius entered the mining industry as early as the end of 2020. Its specific performance is to provide a revolving loan of up to 750 million US dollars for mining operations, which Celsius defines as a long-term investment in mining . At present, it has a total of 80,000 mining machines, of which more than 40,000 are in operation, producing 14.2 bitcoins per day. Celsius hopes to gradually recover the cost of the loan in this way.

This is very similar to a one-time investment in a brick-and-mortar industry. For example, to open a restaurant, one-time heavy asset investment in the early stage, and recover the cost through continuous and stable turnover. But there is a premise that the value output per unit time is stable. Compared with the previous high, Bitcoin has fallen by more than half, which means that the mining cycle has become longer. Coupled with the thunderstorms in other financial businesses, the house leaked and it rained overnight, and it was a foregone conclusion that Celsius would come to an end. As of the end of May this year, Celsius still had about $570 million in uncollected loans.

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The quality of mining is actually limited by the price of Bitcoin, and the quality of various Cefi financial services is limited by the performance of Defi protocols and altcoins in the market. The two are actually strongly related. Once the market goes bad, whether it is a bit or a copycat will plummet, and Celsius’ financial business and mining business will inevitably suffer heavy losses. This is a risk that all crypto companies face, but Celsius bears the brunt of it.

In addition to the discharged Defi loan and FTX loan, the bankruptcy filing shows that the company (debtor) currently holds about $130 million in cash ; in addition, it also has $4.31 billion in assets (almost the same as the balance sheet above), non- User assets are only $780 million in liabilities (4.7 billion are owed to users in the balance sheet above, and the others add up to 780 million).

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In addition, in order to close the gap in the balance sheet, Celsius hopes to solve the current deficit by mining Bitcoin. To put it bluntly, this matter is to exchange time for space. As long as the bitcoin price is not below the shutdown line, the company’s mining business can continue to operate, and the financial hole can be plugged by mining bitcoin and selling it.

In the future, who will suffer losses if they do not file for bankruptcy?

From the equity structure of Celsius, the holders include WestCap Group, a US-based venture capital firm; CDPQ, Canada’s largest pension company; Tether ( USDT company) and BNK to the Future (invested in Bitstamp and Bitfinex), None of these institutions are generalists.

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The list of creditors of Celsius is more interesting. The largest creditor is Pharos USD Fund SP, which is still owed $80 million. And the well-known Alameda Research is only 12 million US dollars, which is particularly striking compared to this little-known largest creditor.

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news.bloomberglaw.com

However, according to the verification of Twitter user @Emily Nicolle, several employees of this company have connections with SBF, and the company’s CEO was a former co-founder of Alameda. If you are interested, you can view the original post:

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Taken together, the bankruptcy of Celsius involves the interests of many creditors and debtors inside and outside the circle, which can be said to affect the whole body. Neither side wants to suffer losses. After the bankruptcy filing, it is hoped that the interests will be balanced.

In such a market filled with the laws of the dark forest, I hope that we will never see that the hunting of giant whales, the mistakes of projects, and a new round of growth all come at the cost of the real money of the little whites.

And in the future, will you be the one whose interests are damaged again?

Posted by:CoinYuppie,Reprinted with attribution to:https://coinyuppie.com/deciphering-celsius-bankruptcy-filing-how-many-bullets-it-has-left-now/
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