The Celsius Network, a decentralized financing platform (DeFi) and one of the largest cryptocurrency providers, announced Sunday night that it was “pausing all withdrawals, changes and transfers between accounts.” It has 1.7 million customers.
The company’s testimonial, CEL, is trading at 23 cents as of this writing, according to CoinMarketCap. That’s down 92 percent since April 8, when the CEL was worth $ 3. The testimonial was worth almost $ 7 a year ago.
There have been questions about Celsius Networks’ high yields, its connections to the stable currency Bankruptcy and its reserves. The value of its platform’s assets was halved to $ 12 billion in May from $ 24 billion in December 2021. Between March and May, $ 1 billion left the system, The Financial reported. Times.
In a June 7 blog post titled “Damn the Torpedoes,” the company said, “Celsius has the reserves (and ETH more than enough) to meet its obligations, as dictated by our comprehensive risk management framework.” liquidity “.
That was it then. On June 12, an email to all customers began:
Due to extreme market conditions, today we announce that Celsius is pausing all withdrawals, exchanges and transfers between accounts. We are taking action today to put Celsius in a better position to meet its retirement obligations over time.
Skeptics have been wary of the high returns promised by Celsius for years
In theory, Celsius works the same way a normal bank does, except in cryptocurrency. He collects deposits and then lends them. An ad on the Celsius site from this writing offered an annual percentage return of 18.63 on cryptographic deposits. Unlike a bank, Celsius does not have FDIC government insurance to protect people in the event of a bank failure.
Skeptics have repeatedly warned that the Celsius network is bound to fail. Some have even argued that Celsius is a Ponzi scheme.
Due to its size, Celsius touches many other parts of the cryptocurrency markets. For example, Celsius Network borrowed $ 500 million from Tether, the stable currency linked to the dollar. (The loan was originally $ 1 billion, Bloomberg reported.) The loan is secured in Bitcoin. “If Bitcoin falls, they’ll call us out [and then] we need to give them more Bitcoin, “Celsius CEO Alex Mashinsky told the Financial Times last year.
Even investors who are not directly involved in cryptocurrency have exposure to Celsius. Canada’s second-largest pension fund, Caisse de Dépôt et Placement du Québec (CDPQ), invested as part of a $ 400 million capital round for the company.
Celsius lost millions in BadgerDAO hacking
Regulators have expressed interest in Celsius network operations. Only on September 17, 2021, New Jersey issued a cessation and withdrawal order to the Celsius Network, Texas scheduled a hearing to determine whether to issue a cessation and withdrawal, and Alabama asked Celsius why not he had to ban. within one month. In October 2021, New York Attorney General Letitia James included the company as one of the platforms requested to provide information on its activities and products, and Celsius said it was working with regulators of the company. state.
There are more. The Celsius CFO was arrested in Israel in November on suspicion of money laundering, fraud and sexual assault. (These allegations were about his behavior at his previous job; he was suspended from Celsius after his arrest.) When the DeFi BadgerDAO platform was hacked in December, blockchain activity showed that the Celsius network lost $ 54 million in crypto. Celsius stated that the assets of customers and users were not affected.
In a note to its customers, Celsius said that “the company’s ultimate goal is to stabilize liquidity.” He did not give a date for when customers could expect to be able to withdraw again, warning that “this process will take time and there may be delays.”