Celsius Network’s Chapter 11 proceedings have revealed that the bankrupt crypto lender suffered total asset losses of US$17.8bln since March 30, predominantly driven by a US$12.3bln decline in market value of held assets.
Documents filed before the New York Bankruptcy Court on July 18 show that user withdrawals measured US$1.9bln, while stablecoin Tether liquidated a US$900mln position opened by the platform.
As users remain unable to access billions of dollars worth of funds, the documents make clear the substantial yet understated risks customers were taking with Alex Mashinksy’s company.
Under the terms of the Earn Program, which constitutes 77% of all deposits held by Celsius, “title to coins is transferred to Celsius, and Celsius is entitled to use, sell, pledge, and rehypothecate those coins”.
Celsius customers only retain ownership of their digital assets under the Custody Program, which constitutes just 4% of the entire business.
Mining for Mashinsky
As part of the restructuring plan, Celsius intends to “use Bitcoin minted by mining operations to help fund mining operations and grow Bitcoin holdings”.
According to Attorney David Silver, who has been following the hearings closely, lawyers in the proceedings stated that Celsius expects to mine 10,000 BTC by the end of 2022 and 15,000 in 2023.
However, these projections are contingent on the construction of a Texas mining farm which, Celsius admitted, has yet to be completed.
Judge Martin has agreed to set aside US$5.2mln to cover construction, as well as customs and duties costs.
Silver also Tweeted that Judge Martin Glenn has demanded access to certain crypto transfers that “Celsius so far is trying to hide”.
Trust Celsius, again
Once-scorned Celsius customers could soon have the opportunity to go long again.
On July 19, the company stated that “any reorganisation plan will require buy-in from the community”, and “we intend to file a plan that will provide customers with an option to remain long crypto”.
We know that any reorganization plan will require buy-in from the community.
— Celsius (@CelsiusNetwork) July 19, 2022
What that means in concrete terms is unclear, but it’s likely that Celsius is lining up a staking function with the view of generating long-term yields for patient holders.
That could be a hard sell.
Celsius is next due to appear before the court on August 10.