Group items tagged

"New York Attorney General Letitia James today filed a lawsuit against Alex Mashinsky, a co-founder and former CEO of cryptocurrency lending platform Celsius Network LLC and its related entities (Celsius), for defrauding hundreds of thousands of investors, including more than 26,000 New Yorkers, out of billions of dollars worth of cryptocurrency. The lawsuit alleges that Mashinsky repeatedly made false and misleading statements about Celsius's safety to encourage investors to deposit billions of dollars in digital assets onto the platform. As Celsius lost hundreds of millions of dollars of assets in risky investments, Mashinsky misrepresented and concealed Celsius's deteriorating financial condition. Mashinsky also failed to register as a salesperson for Celsius and as a securities and commodities dealer."

"A U.S. bankruptcy judge ruled on Wednesday that Celsius Network owns most of the cryptocurrency that customers deposited into its online platform, meaning most Celsius customers will be last in line for repayment in the crypto lender's bankruptcy. The ruling by U.S. Bankruptcy Judge Martin Glenn in New York affects approximately 600,000 accounts that held assets valued at $4.2 billion when Celsius filed for bankruptcy in July. The company does not have enough funds to fully repay those deposits, Glenn wrote."

"The collapse of Celsius continues to ripple throughout the world of finance. Canada's second-biggest pension and insurance fund the Caisse de Dépôt invested $150 million into Celsius nine months before its Chapter 11 bankruptcy. Now, the fund may be left empty-handed."

Celsius Network, the crypto lender that is facing a liquidity crisis, has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York. It suspended withdrawals starting June 12, cut jobs and hired restructuring experts to advise on its financial situation. Celsius says it has $167 million in cash on hand, enough to "support certain operations during the restructuring process."

"Celsius, which resembles a bank while touting itself as a democratized interest income and lending platform, is rumored to be insolvent following a freeze on withdrawals over the weekend. Founded in 2018, Celsius had more than $8 billion lent out to clients and $12 billion in assets under management by May of this year, according to the company."

Crypto lending service Celsius paused withdrawals, swaps, and transfers between accounts, citing "extreme market conditions". It did not provide a timeline for resuming normal operations. New Jersey-based Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn a return.

"Celsius Network was never a real business. It did not have a viable business model. Really, it was a momentum trading scheme that relied on the premise that crypto prices would always rise. And when they didn't, it resorted to fake valuations and market manipulation to escape insolvency. It was fraudulent from the start. "

"Celsius is fairly typical among decentralized finance (DeFi) lending platforms. Anyone can hop on and lend and borrow money, but if they are interested in the latter, the loan needs to be overcollateralized, meaning the borrower has to deposit more than they're borrowing. This is counterintuitive to the average person, but remember, crypto is currently unregulated, so there are no debt collectors to keep borrowers from defaulting. "

"The CEO of crypto lending platform Celsius Network has said that Tether lends out new USDT stablecoins in return for cryptocurrencies - a claim that calls further into question Tether's founding promise that it uses only real dollars to issue its tokens. Celsius borrows USDT from Tether in return for well-known cryptocurrencies. New USDT is issued for such loans and later destroyed when the loan is closed so it does not permanently increase USDT in circulation. This flies in the face of the Tether operating model described in its whitepaper - issuance of USDT is supposed to be on a one-for-one basis against dollars. However a primer published in May 2021 says only that that 'newly issued [USDT] must be backed by collateral' and that 'redeemed [USDT] tokens are not released back into circulation unless new collateral has been provided'."

Tether pushed back on rumors that the commercial paper held as USDT stablecoin reserves is 85% comprised of paper backed by (mostly shaky) Chinese or Asian firms. As of the most recent attestation report commercial paper made up about 25% of USDT's backing, and Tether is gradually switching maturing paper into short-maturity U.S. Treasury securities. Also, Tether's Celsius position has been liquidated with no losses to Tether, and Tether has currently zero exposure to Celsius apart from a small investment made out of Tether equity in the company.

Stop talking of Celsius as "managing assets". It is not an asset manager. Its terms and conditions specifically say deposits placed with it are lent to it. There is complete transfer of title. So there are no "assets under management"."

"Celsius is not an asset manager, it's a shadow bank. And deposits in banks aren't even "customer assets", let alone "assets under management". They are unsecured loans to the bank. They are thus liabilities of the bank and fully at risk in bankruptcy. "

"Crypto collapse: Gemini vs DCG, New York charges Mashinsky in Celsius, Voyager sale troubles, Silvergate troubles, Wintermute."

Saga Monetary Technologies has listed its token SGA on crypto lending platform Celsius Network. SGA coin holders can earn up to 9.9% interest, and borrow cash or stablecoins against their SGA at rates as low as 3.45% using their assets as collateral.

Another great summary of the growing DeFi Dead Pool by Amy Castor and David Gerard.

In a recent blog post, the world's largest stablecoin issuer Tether mocked its smaller competitor, Circle (which issues USD Coin), for being unprofitable. In Circle's first quarter of 2022, it was $113 million in the red, whereas according to JP Koning's estimates based on an analysis of Tether's six attestation reports, Tether earned $13 million over the twelve months ending March 31, 2022. Going forward, both Circle and Tether can be expected to earn much more interest income on their base of non-interest-paying customer deposits, but Tether may face losses on its possibly riskier investments, including $62.8 billion in the collapsed lender Celsius, which is probably worthless now.

The decision by Celsius to temporarily prevent its clients from withdrawing funds has shone a light on a group of crypto lending platforms that have been an important engine powering the growth of cutting-edge industry projects. These lenders have served as a bridge between do-it-yourself retail investors and the vast universe of decentralised finance (DeFi) projects seeking financing to help them grow.

Yield farm and "savings platform" Finblox just cut off withdrawals and yield, after a few days of users reporting problems withdrawing funds. Finblox was tiny. It wasn't important or systemic in crypto, the way Celsius or Three Arrows were. But Finblox' failure is a symptom of trouble at the smaller end of the crypto market. There are a pile of little funds like Finblox that are going to get swept away in the storm - taking investors' money with them.

"At the risk of getting into trouble with my boss, who hates jargon like this, one of Celsius's uses of your crypto is to "rehypothecate" it. For those who weren't around for the global financial crisis and don't know that word, hypothecate means party A pledges an asset to party B as collateral to secure a loan. Rehypothecate means party B then takes party A's collateral and pledges it to party C, who passes it to party D and so on. The risk is if one of these parties runs into trouble, then the whole alphabet is in danger."