Cryptography lender Celsius Network has revealed a $ 1.2 billion hole in its balance sheet caused by what CEO Alex Mashinsky called “poor” investments and other “unforeseen” losses.
Celsius made the disclosure while seeking protection from U.S. bankruptcy this week after freezing client funds in June, making it the latest victim of the collapse of crypto markets that has forced two other large companies to recent bankruptcy.
Mashinsky, who co-founded Celsius in 2017, uncovered the scale of the problems for the New Jersey-based company in a 61-page court presentation Thursday. It showed liabilities of $ 5.5 billion and assets of only $ 4.3 billion.
The vast majority of liabilities, $ 4.7 billion, were attributed to Celsius users. The presentation suggested they could face significant losses and blamed the company’s problems on a mix of bad bets, market conditions and a failure to manage its rapid growth.
“The amount of digital assets enabled [Celsius’s] platform grew faster than the company was prepared to deploy. As a result, the company took what, in retrospect, turned out to be certain deficient asset deployment decisions, ”Mashinsky wrote in the presentation.
Celsius was one of the few cryptocurrency lenders to get billions of dollars in current investor assets in recent years. It promised interest rates of up to 18 percent on certain cryptocurrencies.
Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec, and investment firm WestCap led a $ 600 million round of capital funding last year that valued Celsius at $ 3 billion. dollars.
The lender is the third largest cryptocurrency company to go bankrupt, after cryptocurrency broker Voyager Digital and hedge fund Three Arrows Capital. All three have been affected by the collapse in the prices of cryptographic assets and the freezing of credit in the market.
Mashinsky admitted a series of mistakes that had resulted in losses and detailed investments that had left Celsius unable to return the money to customers, as he suffered a banking career this year.
One was a $ 510 million loss discovered in 2021 when Celsius tried to regain the collateral it had pledged to cover loans from an unnamed “private lending platform”.
“The lender was unable to return the… Guarantee on time,” Mashinsky wrote. About $ 440 million remains outstanding, he added.
Celsius also incurred losses of nearly $ 100 million when the collateral it had pledged to secure a loan from Tether, the stable currency issuer that is a capital investor in Celsius, was settled by mutual agreement in the last months.
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Mashinsky said about $ 1 billion of Celsius’ funds were illiquid because they had committed to the company’s bitcoin mining operation or invested in a version of the Ethereum network that was not ‘has launched.
He suggested that Celsius’ recovery plan could involve the use of bitcoins generated from its mining operations to “address its current cryptocurrency deficit.”
In addition to admitting the company’s mistakes, he blamed “misinformation” on media and social media for encouraging customers to take out about $ 1 billion in funds over five days in May.
Mashinsky said Celsius had been on its way to tackling its problems when the market turned this year.
“The company believes it would probably have been successful in the near future if the market had remained relatively stable.”