Celsius is preparing to restructure its platform to save itself from potential collapse
By Shashank Bhardwaj
Celsius Network LLC, a crypto lending platform, has hired attorneys specialised in business restructuring from the law firm Akin Gump Strauss Hauer & Feld LLP to advise on potential solutions to its mounting financial problems. Celsius informed its users on Sunday that it was halting all withdrawals, swaps, and transfers between accounts due to ‘extreme market conditions’.
According to its website, Celsius had $11.8 billion in assets as of May 17, down more than half from October, and had processed a total of $8.2 billion in loans. On crypto asset deposits, it offers users annual percentage yields of up to 18.63 percent. The platform has 1.7 million users as per company sources. Celsius was first looking for potential financing options from investors. However, it has reportedly decided to consider financial restructuring.
Celsius has been struggling to cover a number of its debts. Some investors may interpret this as a sign that the platform might not be able to survive the current chaos. Following the collapse of the Anchor Protocol on the now-named Terra Classic blockchain, Celsius users have criticised the platform for how they believe the project mismanaged its funds. With its recent moves to stabilise liquidity, the platform may be trying to address those concerns.
The Celsius platform earns a return by lending out customer deposits to other users. At its peak, Celsius held up to $10 billion worth of user funds. Celsius has staked 204 million USD Coin (USDC) stablecoins on Aave since Sunday. It has also deposited 10 million USDC as well as approximately 8.2 million Dai (DAI) stablecoins to Compound, another DeFi staking and lending platform. The amount of tokens re-staked equals the value of wBTC it had removed earlier but comes nowhere close to the combined value of wBTC and wETH.
The move triggered a drop in the value of crypto assets, which fell below $1 trillion on Monday for the first time since January 2021.
Lawmakers have recently focused on what might happen if a crypto asset platform fails. Last week, a bipartisan pair of senators proposed legislation to protect investors in the event that a crypto exchange declares bankruptcy by ensuring that their digital assets are held separately.
On Monday, rival crypto lender Nexo announced an offer to purchase Celsius' outstanding assets. Akin Gump's spokeswoman had no immediate comment. Celsius executives as well did not respond immediately to requests for comment. In May, it was reported that Celsius CEO Alex Mashinsky had deflected blame for the platform's problems, including rumours of insolvency, to shadowy Wall Street opportunists.
The writer is the founder at yMedia. He ventured into crypto in 2013 and is an ETH maximalist. Twitter: @bhardwajshash
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