Celsius’ bankruptcy filing has revealed some facts about the state of the crypto lending platform, including a $1.2 billion deficit molded mostly as a result of user deposits some believe may not be required to give back.
Celsius CEO Alex Mashinsky signed a chapter 11 bankruptcy document on July 14 that revealed that the company holds around $4.3 billion in assets against $5.5 billion in liabilities, representing a $1.2 billion deficit.
User deposits made up the majority of liabilities at $4.72 billion, while Celsius’ assets include CEL tokens as assets valued at $600 million, mining assets worth $720 million, and $1.75 billion in crypto assets.
The value of the CEL tokens has drawn misgivings from some in the crypto community though, as the total market cap for CEL tokens is only $321 million, according to CoinGecko data.
Among the crypto assets are 410,421 Lido Staked ETH (stETH) tokens worth about $479 million which are generating 5% APY, though the tokens themselves cannot be exchanged for Ether (ETH) until the Ethereum network transitions into Proof-of-Stake consensus in the Merge.
A document stating that the company could also sell Bitcoin (BTC) mined by its Celsius Mining Bitcoin mining operation to “generate sufficient assets” to repay at least one of its loans and provide revenue for the company in the future is signed by Celsius CEO Alex Mashinsky. The company projects that it could generate about 15,000 BTC through 2023.
Swan Bitcoin founder Cory Klippstein has criticized both Celsius and Voyager’s recent decision to file for Chapter 11 protection rather than the Securities Investor Protection Act (SIPA).
Klippstein tweeted on 14th July that filing under SIPA would have shifted possession of the firm’s assets over to customers, which would have at least given them a portion of their deposits back.
The company filing for protection claims ownership of all assets under Chapter 11 bankruptcy proceedings. Under SIPA, a failed firm must either transfer its accounts to another firm or be liquidated and send funds to investors.
In a July 14 blog post crypto skeptic economist and blogger Frances Coppola shared more potential bad news by explaining why she believes Celsius depositors “won’t get their money back.”
“Deposits in banks aren’t even ‘customer assets,’ let alone ‘assets under management.’ The unsecured loans to the bank. They are thus liabilities of the bank and fully at risk in bankruptcy.”
She further explained, “depositors in a bank do not have any legal right to return their funds. Even if the terms of the account say funds can be withdrawn whenever the customer chooses, the bank can refuse to allow customers to withdraw their funds if it doesn’t have the cash to pay them.”
Coppola further said that Celsius’s terms of use make it clear that Celsius is allowed “to do as it pleases” with funds deposited by customers.
“And it specifically says that in the event of bankruptcy, customers might not get all — or indeed any — of their money back.”
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