Attorneys from the crypto lending firm Celsius have confirmed that it has half a million creditors owed more than $5 billion in total during its first bankruptcy hearing.
Celsius is one of many crypto companies that have been heavily hit by the crash of the stablecoin Terra/LUNA. Celcius has said that its insolvency can be attributed to “extreme market conditions”, the insolvency of hedge fund Three Arrows Capital, and a surplus of withdrawals made on the platform.
Celsius formally filed for Chapter 11 bankruptcy protection last week, and soon was joined by Voyager Digital, another crypto lending company. Chapter 11 bankruptcy, or a “reorganisation bankruptcy” allows for companies time to acquire finances in order to repay their debts. Chapter 11 bankruptcies additionally allow companies to have a time window where civil litigation from creditors cannot be attempted.
According to balance sheets, Celsius $1.2 billion owed, and users that have held their crypto via Celcius are likely to be paid back at a much later date. Additional documents have shown that Celcius owes $4.7 billion to its customers – which is almost three times more than what it currently holds in digital assets.
As of July 14, its digital assets holdings are at $1.7 billion, in contrast to $14.6 billion held at the end of this past March. Celsius has also stated that it holds $170 million in cash in a bank. Additional assets include mining equipment ($720 million), outstanding loans ($620 million), and other miscellaneous assets ($450 million).
Court documents have also indicated that Celcius’s token, CEL, accounts for $600 million in assets held – a much higher valuation than the total market capitalisation of the token, and is at risk of regulatory scrutiny from the US Securities and Exchange Commission.
The total value losses added up are also cited as such:
- Tether (USDT), a stablecoin issuer and an investor in Celcius, has set it back $900 million when it liquidated a loan to Celcius.
- Users have withdrawn amounts $1.9 billion in a short span of time following the USDT crash.
- Loan redemptions and liquidations set back Celcius’ assets another $1.9 billion.
- Firms have stated that Celcius has lost $100 million from additional investments.
Law firms have claimed that Celcius went through a $12.3 billion loss in its assets. Another court document has cited that Celcius experienced “unanticipated losses to the business.”
During Monday’s hearing, court documents and a 61-page declaration from Celcius CEO Alex Mashinsky showed that Celcius’ plans to recoup its losses are heavily dependent on predicted future profits from its mining subsidiary, Celsius Mining. As of writing, Celsius Mining is half-finished, and is also a debtor.
“If everything goes well, in 2023 we hope and expect to be in a position to mine approximately 15,000 bitcoin [per year]” says Pat Nash, Celsius’ lead attorney. Nash also stated that Celcius Mining was mining 14.2 bitcoins per day – and is expected to mine 10,100 bitcoins this year.
Nash has told the court that Celcius has 300,000 depositors who have more than $100 worth of crypto in their accounts, out of a total 500,000 depositors.
Additionally, Celsius attorneys have asked court entities to redact names personally identifying company employees and creditors. Celcius insolvency has resulted in death threats and malicious content being sent to Celcius employees and corporate creditors.
As it stands, the U.S. Trustee is undergoing the formation of a committee of creditors. Typically, these committees consist of the seven largest unsecured creditors of the debtor, and assist in overseeing bankruptcy proceedings. Appointed creditors also investigate the debtor’s conduct, business operations, and assist in a company reorganisation plan.
The second hearing is scheduled for the morning of August 10.