Celsius allows 94% withdrawal of assets for some customers
Celsius, a defunct cryptocurrency lending platform, will begin processing customer withdrawal requests in the next few days. The firm started the day by disseminating a 1,400-page court document on Twitter, which said that the withdrawal would be for specific assets held in certain custody accounts.
Who can withdraw?
Before any withdrawals are performed, Celsius, whose troubles started in June 2022 amid the bitcoin plunge witnessed then, will ask customers qualified for the service to update their Celsius account with certain needed information. This is done for both security and regulatory reasons.
In addition, consumers in this category are only permitted to take around 94% of their assets that are available for withdrawal from custody. In addition, it was said that the court would give a verdict on whether or not they would pay out the remaining balance later.
In addition, customers who request a withdrawal will be given detailed information on the transaction and gas fees related to the withdrawal process. Users who need more assets to cover the expenses will be denied the ability to request a withdrawal.
Celsius faces Ponzi scheme accusations
Because of the very volatile market circumstances, Celsius Network had blocked access to its clients’ cash as early as June 2022, shortly after the failure of the Terra Luna projects.
The cryptocurrency lender submitted its bankruptcy petition in July with around $167 million in cash on hand and assets valued at $4.3 billion but owing over $4.7 billion to its customer base.
An impartial examiner named Shoba Pillay recently said that Celsius Network deceived its investors and, on occasion, utilized new customer cash to pay for the withdrawals of existing customers, which is the typical description of a Ponzi scheme.
Pillay maintained that Celsius’ troubles did not begin in 2022 when they were first reported. Instead, severe problems started occurring at least as early as 2020, when Celsius began diverting customer assets to pay for operating fees and incentives.
Celsius lending issues
In the recently issued report, the examiners and legal officers in the case exposed many illegal and dirty dealings associated with Celsius. First, the court report talked about the loan to Tether by Celsius, which reportedly surged to about $2 billion only in 2021.
According to the report, this lending proliferated, and Celsius’ risk committee raised concerns about its sustainability, terming it an existential risk. With that much lending, it was unclear whether Celsius would survive any payment defaults from the Tether network.
This report further elaborates that the loans from Celsius to Tether were two times the standard credit limit.
Interestingly, this same Celsius gave loans to several other now-defunct crypto networks like Alameda and Three Arrows Capital. Like in Tether, the loans to the companies mentioned above exceeded the standard credit limit. There were also loans to smaller networks like Dunamis trading, Kinetic Trading, Amber technologies, and Profluent Trading, all exceeding credit limits.
Aside from exceeding the standard credit limit caps, Celsius made a bunch of unsecured loans. About a third of Celsius’ entire loan portfolio unsecured loans to different companies, including Anchorage, Galaxy Digital, Flow Traders, and an FTX subsidiary. Based on the report, such unsecured loans helped generate income to keep Celsius afloat.
The report also talked about under-collateralized loans, mentioning that more than half of the loans were under-collateralized in July 2021. It’s only since July 2021 that the amount of fully collateralized loans began to rise since Celsius began accepting collateral in the form of FTT, FTX’s native token, and SRM tokens.
Cel token problem?
The report also uncovered that CEL, the “backbone” of Celsius network operations, had its problems. There were hidden and false details about the token’s ICO.
While the company claimed to have sold 325 million CEL in the ICO plus other private rounds, it only sold about 203 million tokens. As such, from the beginning, there was already a deficit in funds raised.
There were reports that Celsius participated in some’ price manipulation’ system by selling CEL in private and offsetting purchases in public markets. As Celsius’s backbone, CEL price drops last May triggered the network’s fall. In the same report, Celsius was dubbed a ‘Ponzi scheme.’