The Celsius platform is bankrupt. The crypto bank, which promised its clients insane returns, could not withstand the tornado blowing through the market.
Celsius filed for bankruptcy in a New York court. The platform specializing in cryptocurrency lending has positioned itself under the protection of “Chapter 11”, the American bankruptcy system.
Celsius is a heavyweight in the crypto universe. The platform attracted 1.7 million customers. Last May, it claimed $12 billion in assets under management. Its main activity is cryptocurrency lending.. Customers deposit their crypto assets on the platform. In return, they receive interest. It is a crypto bank.
If the platform has attracted so many customers, it is because Celsius returns their deposits very handsomely. On its website, the platform promised annual returns of up to 18%. As long as the cryptocurrency market was euphoric, everything was fine. With the crypto-assets deposited in his accounts, Celsius could buy other virtual currencies and make beautiful operations. The depositors received their interest and did not complain.
Celsius seems to have made very poor investments in recent months with funds from its customers. The cryptobank was heavily exposed to Terraa stablecoin (stable cryptocurrency) that completely collapsed last May. The same mishap happened to him with sETH. This asset, whose price was supposed to match the price of ethereum – the second cryptocurrency in circulation after bitcoin – also suddenly fell.
In the end, the platform simply does not have the funds to refund its customers. Its liquidity problems led to its losses. This is what happened last week with Voyager Digital, another crypto bank. Platforms Vauld, CoinFlex and Babel Finance are experiencing similar setbacks and also have frozen ascents.
“There is no crypto miracle. The basic economic logics are the same as in the traditional market. You have to be able to honor your obligations.”
“There is no crypto miracle. The basic economic logics are the same as in the traditional market. You must be able to meet your obligations and therefore have enough equity to reimburse your clients when the market turns. The risk management at Celsius has obviously had some shortcomings“, analyzes Kevin de Patoul, CEO of Brussels scale-up Keyrock, which works with major crypto platforms.
No safety net
Celsius is now trying to recoup cash by selling its positions. The platform announced that it had released $167 million. This amount will be used to ensure the company’s operational continuity and to pay its employees. Customers who are not among the priority creditors must wait. In the deregulated crypto world, they have no guarantee of getting their money back. When a bank goes bankrupt, the depositors are covered up to 100,000 euros. When a crypto bank fails, there is no safety net.
- The Celsius platform is bankrupt.
- The cryptobank promised its customers insane returns, which could go up to 18% on an annual basis.
- She could not withstand the tornado that blew over the crypto market.
- Its liquidity problems led to its losses.