Celsius reports a $1.2 billion hole in its balance sheet

The crypto-lending platform Celsius Network said its liabilities exceed assets on its balance sheet by almost $1.2 billion.

According to the new documents, as of July 13 the company held assets of $4.3 billion. Its obligations to customers and creditors totaled $5.5 billion.

Celsius said its assets in CEL tokens amounted to about $600 million. However, in the same documents the company noted that as of July 12 the token’s total market capitalization was about $170.3 million.

Mashinsky attributed the company’s problems to a combination of poor investments, market conditions, and an inability to manage the platform’s rapid growth. As a result, Celsius had “disproportionate liabilities”.

The company said it had repaid “almost all” of its loans in DeFi protocols and FTX as of the petition date. According to the data provided, the platform had one loan remaining of $3.2 million, secured by $6.6 million.

In addition, Celsius disclosed providing two loans to hedge fund Three Arrows Capital for $75 million. When the latter ran into trouble, the company forcibly partially liquidated the collateral. As a result, Three Arrows Capital owed Celsius $40.6 million. At the beginning of July the hedge fund filed for bankruptcy.

Documents also show that the largest unsecured creditor of the company is Pharos USD Fund SP, registered in the Cayman Islands.

Bloomberg found that Pharos USD Fund SP is affiliated with Lantern Ventures. The latter is connected to venture firm Alameda Research Sam Bankman-Fried.

The latter is also mentioned in Celsius CEO documentation — the crypto-lending platform owed Alameda Research nearly $12.8 million.

In June Bankman-Fried said that Alameda Research is taking steps to mitigate the adverse effects on the cryptocurrency market due to Celsius’s problems.

Media reported that the exchange FTX, founded by Bankman-Fried, was considering helping Celsius, including an acquisition of the platform, but walked away from the deal after reviewing the company’s finances. According to sources, FTX found a hole in Celsius’s balance sheet of about $2 billion.

On 13 June the platform suspended withdrawals, exchanges and transfers between accounts. A month later, on 14 July, Celsius Network and some of its subsidiaries filed for bankruptcy.

Prior to this, the platform fully repaid a loan in the DeFi protocol MakerDAO and withdrew a total of 23,962 WBTC of collateral. Just a few hours after repaying this debt Celsius transferred 24,463 WBTC to the FTX address.

On 13 July Celsius repaid the last major loan in the DeFi protocol Compound and withdrew slightly under $200 million in WBTC, and the day before — a loan in the Aave protocol, freeing collateral in more than 400,000 stETH.

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