Celsius bankruptcy documents reveal: spent 750 million on mining machines, liquidated after borrowing 840 million from Tether
Celsius invested a significant amount of customer funds (a credit line of $750 million) into its own mining business, with $576 million outstanding as of the end of May.Author: Colin Wu, Wu Says Blockchain
According to documents submitted by Celsius consulting partner Kirkland & Ellis to the U.S. Bankruptcy Court for the Southern District of New York, details on how the company, which has 1.7 million users, went bankrupt have been widely disclosed.
As of July 2022, Celsius had 1.7 million registered users and 300,000 active users with balances over $100, paying about 5% in financial rewards. Celsius had 23,000 retail borrowers with $411 million in outstanding loans and $765 million in collateral; the company had 47 institutional borrowers with $93 million in outstanding loans and $98.5 million in collateral.
The documents show that Celsius held $4.3 billion in assets and $5.5 billion in liabilities, resulting in a $1.2 billion shortfall. Among these, non-user assets amounted to only $780 million. Previously, FTX had considered acquiring Celsius but abandoned the idea after learning about its financial situation, believing there was a $2 billion hole in Celsius's balance sheet.
The documents reveal that Celsius invested a significant amount of customer funds ($750 million in credit lines) into its own mining operations, with $576 million outstanding as of the end of May. It currently owns 80,850 mining machines, with 43,632 operational. Notably, most of Celsius's mining machines were purchased in 2021, and their prices have since dropped by more than 50%.
In 2021, a mistake by Eth2 staking service provider StakeHound resulted in Celsius losing over 38,000 ETH.
Due to the rapid withdrawal of UST, Celsius suffered relatively minor losses of only $15.8 million during the LUNA collapse. However, market rumors about LUNA led to over $1 billion being withdrawn from Celsius within five days, causing a bank run.
Celsius provided two loans totaling $75 million to Three Arrows Capital (3AC), and when 3AC failed to meet margin call requirements, Celsius liquidated the collateral held by 3AC, resulting in a loss of $40.6 million.
Tether provided Celsius with loans of up to $841 million. During the liquidation, Celsius incurred a loss of $97 million. On March 12, 2020, Tether had previously given PayPal more time than usual to continue repaying loans. However, during this downturn, Tether clearly opted for direct liquidation rather than playing the "white knight" again.
From 2019 to 2021, Celsius borrowed money from a private lending platform, but when Celsius attempted to repay the loan in 2021, the other party claimed it could not repay the collateral. This resulted in the lender owing Celsius $361 million and 3,765 bitcoins. The documents did not disclose the name of this platform.
The documents state: Although the company's (Celsius) directive was to only engage in market-neutral trading deployments, certain asset deployment decisions were made during its unexpected asset growth period that later proved problematic. While the company took necessary measures to "unwind" these deployments, unfortunately, the damage had already been done.
Crypto lawyer @wassielawyer stated that comparing the statements submitted by Voyager and Celsius, Voyager made a huge mistake (3AC Loan) and owned it. Celsius, on the other hand, engaged in a series of bad trades, blaming their current predicament on price declines and negative news.
