Celsius acknowledges $1.2B hole in balance sheet

https://www.coindesk.com/business/2022/07/14/celsius-acknowledges-12b-hole-in-balance-sheet/

by T-A • 4 years ago

231 307 4 years ago

If I read it correctly it's more like a 1.8 bn hole.

They are counting 600m of their own token, which already had only 170m or whatever of market cap, which presumably now is absolutely worthless.

I don't mean worthless in a conceptual sense like all crypto, but this specific brand of made up money is based on the trust of a bankrupt lender. Nobody is buying that and counting it as 600m of asset is absurd.

It's like writing yourself a bunch of IOUs and claiming it gives you wealth.

voodootrucker• 4 years ago

So exactly like the federal reserve or the social security administration buying US bonds then?

mushufasa• 4 years ago

no, in fact it's not exactly like that.

bardworx• 4 years ago

Nothing like that.

moralestapia• 4 years ago

US Bonds are not worthless, come on.

everfree8• 4 years ago

It doesn't work quite as well if you're not a sovereign government.

SilasX3• 4 years ago

For reasons I don’t claim to understand, their token is still trading at about a third of where it was three months ago:

https://coinmarketcap.com/currencies/celsius/

amluto3• 4 years ago

This happened with Hertz during bankruptcy. And apparently it wasn’t entirely nuts:

https://www.forbes.com/sites/kevindowd/2021/11/07/how-hertz-...

sbierwagen• 4 years ago

Terra classic is still trading... at $0.00009 https://coinmarketcap.com/currencies/terra-luna/ It had a big jump when Terra 2.0 was launched. (That coin is, inexplicably, still trading in the $2 range, by people who are looking to add a lot of excitement to their life.)

ufo• 4 years ago

Don't forget about the $720M in "Mining Assets". I wouldn't be surprised if the true value were much lower than this, now that crypto prices have crashed.

jsemrau2• 4 years ago

This could also include GPUs, Asics, and other mining equipment which given the upcoming ETH merge should be amortized differently.

gkapur• 4 years ago

I think they are claiming they can mine something like 10k bitcoin/year (https://twitter.com/ThePrivatier/status/1547613977231798272) going forward but I have no idea what the COGS/cost between labor/maintenance and electricity is to mine that. If it's say 50%, then those "mining assets" will pay back in 7 years.

Seems like people are going to take a large haircut on whatever they deposited and then maybe get back some incremental cash over time.

titzer• 4 years ago

It's like writing yourself a bunch of IOUs and claiming it gives you wealth.

I think you just described monetary policy.

jakelazaroff• 4 years ago

“Monetary policy” is backed up by the military. What are Celsius’ tokens backed up by?

eropple• 4 years ago

If you can require people to pay taxes in your money, you made money.

They can't. They didn't.

TheAlchemist• 4 years ago

I read it as a 5.5 bn hole !

Who in his right mind puts 'Other' with a 270 millions $ figure next to it ?

It reads like Tether attestations. It's pretty amazing (or rather depressing) that Mashinsky is still not in jail. Hopefully, this will open the eyes of some crypto naive fans.

once_inc• 4 years ago

I don't mean worthless in a conceptual sense like all crypto

As a Bitcoin Maximalist, I agree with your statement almost wholeheartedly. These platforms offer nothing valuable except for the life lesson at the end not to gamble away your life savings in shady investment vehicles that offer unsustainable yields without a transparent earnings model.

sushid• 4 years ago

It's crazy to think this is all because of Terra. Terra crashed, tanking the entire crypto sector -> 3AC defaults as they lost $$$$ on Luna -> Celsius, who already had a dubious "diversification" strategy, emerges as a big bagholder.

tim3339• 4 years ago

A house of cards collapses with one card first.

tim3339• 4 years ago

I'm short CEL token and it's taking it's time to collapse but I agree with you there's not much value there. (You can short on FTX futures in case anyone is inspired - not investment advice).

RileyJames• 4 years ago

I’d have thought CEL would have gone to zero, but it still seems to be hover around ~0.75. Tho there’s only 2m in volume. So it’s unrealistic that Celsius would be able to offload 600m worth.

But why would anyone be buying it now?

The hope that a) Celsius comes out of bankruptcy and b) they continue to honour their existing CEL token, seems a bit far fetched.

adam_arthur2• 4 years ago

Scam, after scam, after scam, after scam...

sergiotapia2• 4 years ago

Still waiting to see even one single useful use case for cryptocurrency and block-chain storage.

It's all a grift to take money away from stupid retail investors trying to get rich quick.

mccorrinall7• 4 years ago

I pay my servers at vultr.com, my domains on porkbun.com and my drugs on $market with bitcoin :)

qbasic_forever• 4 years ago

IPFS has some cool use-cases, like anti-censorship webhosting. I'm with you on waiting to see actual money use cases that crypto is better at than real dollars/credit cards. It's not even good for money laundering since the blockchain leaves a very public trail that lasts forever.

colechristensen5• 4 years ago

Interbank nightly balance settlements between large institutions. A distributed cryptographic ledger would be great for this kind of thing. A private “coin” between mostly trusted partners with provisions for reversing transactions as needed.

Useful because it would have lower administration overhead than one bank maintaining a service for exchanging funds, no concerns about downtime, and all sorts of guarantees about the correctness of balances. Lots of back end software that just doesn’t need to be written or maintained.

Lots of similar usecases where small mostly trusted groups need to keep track of asset transfers or trade between them.

aaronbrethorst• 4 years ago

money laundering?

alasdair_3• 4 years ago

I used to pay to run a few TOR exit nodes located in Iceland that I didn't want tied to me because I didn't want the hassle. It was marginally easier to use bitcoin than it was to get a prepaid credit cards with cash each time.

That's about it though.

JumpCrisscross5• 4 years ago

Crypto is our generation’s write off. The cost of a free market economy. We’ll have people with stranded skill sets. They deserve compassion; though based on precedent, they will find none.

Maybe in a hundred years we’ll realise they were ahead of their time. When some UN blockchain extends across the solar system. Like how we remember N. Tesla and the 90s’ satellite internet folk. Financially ruined. But cute in their own way.

There are a lot of boomers recapitulating their 90s in crypto. They’re fine. They’re gambling. I have a lot more sympathy for the young people wrapped up in the whirlwind. They’re making me wealthy. But oof, do I wish they’d widen up.

impulser_4• 4 years ago

There are features of cryptocurrencies that would actually be useful in today's financial services.

The main one would be near instant settlement. If I make a transaction on Bitcoin, that transaction is completely settled and verified and approved over a hundred thousands times within an hour.

All parties can trust that the transaction happened and everyone has their money. That's not possible in today's financial systems. We don't even have settlements on weekends.

If you sell a stock on Friday, you aren't going to get your money until Wednesday at the earliest. We don't even have T+1 settlement in the US yet lol.

Why do business days exist in todays financial system. If I transfer money from my brokerage on Friday why can I get access to that money right away instead of waiting over the weekend.

brianobush• 4 years ago

I would like to make quick (<30 min) transactions of large amounts. I can do that with BTC, but it would be nice to do this with USD. Currently, this involves finding a bank, go during the right time, proper account numbers, etc.

game-of-throws3• 4 years ago

We've had two crypto threads in the past two days. They both had a real world use case in the top comment:

https://news.ycombinator.com/item?id=32080174

https://news.ycombinator.com/item?id=32094142

Or do those not count?

StanislavPetrov3• 4 years ago

Still waiting to see even one single useful use case for cryptocurrency

Sending funds to people outside of the country without being reliant on gatekeepers is extremely useful. This is especially true if you want to send funds to people and/or organizations being blackballed by the US financial establishment (either because of their function, such as Wikileaks, or their location, for living in a frowned upon country).

I still find it somewhat astounding that people, especially techies, can't see the extreme utility in this function. But, unfortunately, ideology often trumps logic.

johnnymorgan• 4 years ago

How about WikiLeaks insurance files, pretty the only reason Assange is still alive.

They stuck them in there around 2012, during the dust spam (which wasn't dust spam, it was a dos attack which failed)

The use cases are there but you've made up your mind to ignore them and act smug about it.

GLHF!

cdiddy2• 4 years ago

Just because you come from a place of great financial privilege and a liberal society does not mean others have no use for a censorship resistant form of money.

Afghanistan: https://theintercept.com/2022/01/19/crypto-afghanistan-sanct...

Argentina: https://www.bbc.com/news/business-60912789

Russia: https://www.reuters.com/world/europe/navalny-ally-urges-dono...

Lebanon: https://www.reuters.com/article/lebanon-crypto-currency-yout...

Nigeria: https://www.coindesk.com/tech/2020/10/16/nigerian-banks-shut...

Ukraine: https://www.cnbc.com/2022/03/23/ukrainian-flees-to-poland-wi...

https://www.financialinclusion.tech/

strangescript• 4 years ago

They weren't really scamming, but got scammed along with several other companies that were trying to be legit. They made large loans to three arrows capital because on the surface it seemed like a legit serious business hedge fund, but it turned out it making tons of high risk bets in the crypto scene that fell apart when the market crashed.

sgjohnson• 4 years ago

By this logic banks putting garbage mortgages in their CDOs and having them AAA rated wasn’t scamming either.

It’s just that they also got scammed when the market crashed!

Oh, wait, they got bailed out.

kareemsabri• 4 years ago

In what way did it seem like a "legit serious business hedge fund"? I'm unclear how Celsius got scammed making loans to a hedge fund that is on record as investing exclusively in crypto since 2018 [1] - did the hedge fund lie about their positions?

1. https://www.smh.com.au/business/markets/school-friends-start...

adrr5• 4 years ago

Was three arrows a scam or just acting like a hedgefund? It’s well known hedgefunds can go bust like LTCM. Especially if you’re doing arbitrage and your thesis is two disparate assets are price linked.

adam_arthur2• 4 years ago

Guaranteeing double digit yields on what is effectively a pyramid scheme is a scam enough in my eyes

wklm• 4 years ago

good luck liquidating this 720M of mining gear :)

yomkippur• 4 years ago

What's sad is that some pension funds have exposure to Celcius. Imagine teaching for decades only to find your retirement pension is reduced because the manager thought it was a good idea to put your money into a ponzi scheme

Invictus0• 4 years ago

I am not sympathetic to teachers or pension funds whatsoever. Teachers should take control of their investments like everyone else: either invest it yourself or make your pension managers invest it properly. Pension funds do all sorts of stupid things: they played a role in 2008, they invest in big oil and other anti-ESG stocks, and now this. They're huge pools of poorly governed funds, it's inevitable that they get abused.

charcircuit• 4 years ago

It wasn't a ponzi scheme. It was just a business that failed to make a profit. Not all investments will be on winners.

tim3339• 4 years ago

I think it was an equity investment so it's more that the manager thought it would be a good idea to profit from said ponzi scheme.

Barrera• 4 years ago

And yet the site apparently continues to accept deposits:

https://celsius.network

Business as usual. Oh yeah, check out our hello bar for that minor detail that withdrawal, swap, and transfers are "currently paused."

These guys are going to prison.

adrr5• 4 years ago

People were still buying hertz stock even though they were going through bankruptcy. They even tried to do secondary offering. Retail investors don’t operate with enough information to make financially sound decisions.

Dylan16807• 4 years ago

And those people might have been right??

modeless• 4 years ago

That's the worst possible example since the retail investors were proven right about Hertz...

civilized4• 4 years ago

Currently paused due to "extreme market conditions". What conditions exactly? BTC is down from all-time high, but still worth about twice as much as it was only two years ago. Ethereum is worth over 4x as much. Is a two-year average appreciation rate of 40-100% per year so witheringly horrible that the Celsius business model couldn't survive it? Did crypto have to basically 2x every year without fail for Celsius to survive?

wmf3• 4 years ago

When everybody piles in near the all-time high then wants to cash out at the bottom, the two-year return becomes irrelevant.

josh2600• 4 years ago

Celsius told their customers they were accruing Bitcoin and then Celsius didn’t buy the Bitcoin to deposit into their accounts, instead using the money to buy their CEL token that their ceo was dumping on exchange.

Their business model was fine. What wasn’t fine was not following it. Abra, Nexo, Gemini, and lots of other companies are business as usual with the same model right now.

danuker• 4 years ago

They assumed collateral would hold 25% of its initial value until the end of the loan.

In the past 12 years, Bitcoin lost 80%+ of its market value. Three times.

It came back before, so they might become solvent again eventually. But this was bad risk management.

everfree8• 4 years ago

The site is not actively accepting deposits. Did you assume that it was, based on something you saw there?

Read this passage from Alex Mashinsky's bankruptcy affidavit:

Importantly, however, shortly after the Pause Date, on June 18, 2022, Celsius made the necessary changes to the Celsius App to prevent any new users from generating a deposit address and thus being able to deposit cryptocurrency on the Celsius platform. Moreover, as of the Petition Date, new users are prevented from even registering for a Celsius Account.

Celsius can't prevent people from sending crypto to addresses that Celsius controls, but that's a whole different story from "continuing to accept deposits."

gcr2• 4 years ago

If Celsius is accepting deposits on existing addresses, they are continuing to accept deposits that they know their customers can't access. Celsius designed the system without an off switch because DeFi systems generally view that as an anti-feature, but that means that they probably aren't able to be compliant with the bankruptcy affidavit.

You yourself wrote that they "can't prevent" deposits for existing accounts. It's very pertinent.

coffee_beqn• 4 years ago

I’m getting a popover saying they’ve filed for chapter 11 when I open that

faangiq• 4 years ago

Fleecing non-Israelis is legal in Israel.

jiggawatts• 4 years ago

This is covered in today’s Crypto Critics’ Corner podcast: https://youtu.be/m6xkCDP1z2s

AndrewKemendo• 4 years ago

The fact that the entire crypto market simply followed the public markets in the downturn, rather than being a haven for wealth that people flocked to for safety, means that "Crypto" is unambiguously just another speculative asset like Art (but worse).

l33t2328• 4 years ago

I’m confused what the alternative is. If it’s valuable and people lose value somewhere in their life, they will exchange their valuable thing to make up for it.

Nursie12• 4 years ago

I’m confused what the alternative is.

For years it has been claimed that cryptocurrency represented a great hedge against traditional assets and investments in the case of a downturn.

Like many other claims made about the utility of cryptocurrency, this too has been shown not to be the case.

biztos• 4 years ago

Show me the IRL crypto party that rivals Art Basel.

Speculation is one part of the art market, but at this point I really don’t think it’s as important as status. Plus, some of the art is really good as, you know, Art.

iownzerobtc• 4 years ago

Have you seen Art Basel lately? It is a IRL crypto party.

trixie_13• 4 years ago

For every seller there is a buyer, and many are buying stocks and crypto right now at low prices. And why wouldn't they? The fed is manipulating the market with interest rates, just as they did during Corona. History proves in the long run holding dollars is good for short term stability, but it's a long term loser.

SamBam• 4 years ago

"For every seller there is a buyer" is the kind of meaningless statement one can make any time there is a major downturn or collapse in a market.

1929-1932, the Dow drops 90%. "For every seller there is a buyer, and many are buying stocks [...] right now at low prices." Some people eventually did great, so it's all wonderful, so long as you ignore the staggering pain of the Great Depression.

SnowHill9902• 4 years ago

The market is like a theater with a small door.

FabHK5• 4 years ago

History proves in the long run holding dollars is good for short term stability, but it's a long term loser.

Right. That's why one should not hold huge quantities of money for long times, but invest in debt and equity. 10 yr real rates even on treasuries have been almost always positive [1], though shorter riskless real rates have gone negative [2].

[1] https://fred.stlouisfed.org/series/REAINTRATREARAT10Y

[2] https://fred.stlouisfed.org/series/REAINTRATREARAT1YE

jonathanyc• 4 years ago

Is there something novel about how it happened, or could the same failure have occurred to a bank in the 1800s?

If it fails and causes normal people to lose their money in the same way as a traditional bank, it should be subject to the same regulations.

dcolkitt3• 4 years ago

One thing to note is that while Celsius, a centralized and opaque yield platform, collapsed, not a single major DeFi protocol failed during a period of enormous stress. MakerDAO, Aave, Uniswap, Curve, Lido and Compound all had perfect 24/7 uptime with zero losses due to unrecoverable debt.

This pretty clearly strengthens the case for pure and transparent DeFi, where anybody can inspect the health of the protocol or the rules of the immutable code. In contrast Celsius failed because it was an opaque black box that primarily lent to other opaque black boxes like Three Arrows Capital.

For a long-time a lot of people just getting into crypto felt like the CeDeFi platforms like Celsius or BlockFi were "safer" than the pure on-chain protocols like Aave or Curve because they didn't have to worry about managing their own keys, there were humans in charge, and a nice corporate entity standing behind it their deposits. As it turns out, decentralized autonomous protocols were substantially safer.

vkou3• 4 years ago

Celsius seems to have been either a ponzi scheme, or a group of morons doing dumb speculative investment on margin, or (most likely) both, but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc.

You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD).

The point of this post is that you can't make something out of nothing. None of these tokens/firms/etc have any idea of how they can make money in the crypto space, because there is no way to make money in the crypto space - because it doesn't produce anything. It's all just negative-sum speculation, and shitcoins investing into other shitcoins, and it all evaporates as soon as the Fed tightens its purse-strings.

Miners make money, people selling shovels make money, everyone else is just trading baseball cards around.

TimJRobinson6• 4 years ago

Their tokens are down, but you don't have to buy them to use the platform, they're basically like shares in a company. I constantly use all those platforms without ever buying their tokens.

AMZN being down 30% in the last 6 months has no impact on how useful Amazon or AWS are as products.

peyton• 4 years ago

Goldfinch is doing ok. It’s a financial system—what do you expect?

yokem552• 4 years ago

but I'd like to point out that MakerDAO is down 70% YTD, Aave is down 60%, Uniswap is down 60%, etc, etc.

The health of the protocols is only very marginally connected to the value of the tokens that govern them. Even if the $UNI token went to zero, the liquidity pools and swap contracts would still work fine. $MKR and $AAVE are a little more complicated because if the governance tokens got too cheap, the protocols could be hijacked and some of the lending parameters could be set to 'broken' values, resulting in liquidations that didn't need to happen. But as of now, the protocols are still working as designed.

tsimionescu9• 4 years ago

You'd have been better off just buying bitcoin on margin (Since BTC is only down 53% YTD).

It's also funny to note that you'd have been better off just buying Turkish Lyra, which is "only" down ~29%. Most fiats, at least in Europe, are down waaaaaay less than that, of course.

So much for crypto as a store of value.

Nursie12• 4 years ago

not a single major DeFi protocol failed during a period of enormous stress

Was Terra/Luna/Anchor/Whatever not a DeFi protocol?

wmf3• 4 years ago

I guess Anchor and Solend are (retroactively) not "major" DeFi.

TimJRobinson6• 4 years ago

They were a DeFi ponzi chain which was obviously going to fail to anyone who spent time looking into it. They were printing a stablecoin backed by nothing.

Far different from the blue chip DeFi apps on Ethereum that the OP listed, which process billions of dollars per day without issue.

DeFi makes things more transparent, but it doesn't make them risk free.

I personally profited off the collapse because of the transparency. Couldn't do the same with Celsius or traditional finance.

tim3339• 4 years ago

I guess Terra/Luna was mostly a DeFi algorithmic stablecoin. Which wasn't a very good idea.

adrr5• 4 years ago

Defi has other problems like the smart contracts getting exploited. $12b have been stolen from them according to the source below.

https://www.elliptic.co/resources/defi-risk-regulation-and-t...

capableweb• 4 years ago

That's true, it's a inherent risk when you deal with "programmable money" in a open and decentralized ecosystem.

While it is a risk, major platforms (like the ones mentioned in parent comment [except Compound]) haven't actually had any exploits of that scope (yet?).

rekt.news is probably one of the best sources of news when it comes to exploits in both "pure" defi and also centralized "defi" (which, doesn't even make sense but I digress) like Celsius. Only Compound has been mentioned there.

Overall, the platforms have been running for a long time, during ups and down, and seem relatively stable at this point, if you're fine with the overall risk cryptocurrencies present.

rmac• 4 years ago

the Curve USTw-3CRV pool "failed"

darth_avocado• 4 years ago

CeDeFi

You gotta be Kidding me. That’s like frozen boiling water.

aahortwwy• 4 years ago

https://en.m.wikipedia.org/wiki/Properties_of_water#Triple_p...

jrm42• 4 years ago

Sure, I'll take it a step further. Any storage of your money that doesn't involve you fully controlling your own keys is stupid because it is literally antithetical to the entire purpose of crypto. If you want to let someone else hold on to your money for yield, great. Use something already established, ensured, and proven. But not crypto.

Not your keys, not your crypto. How many times must it be said?

tsimionescu9• 4 years ago

This only works if you use crypto as a store of value and even then it doesn't scale to any significant fraction of the population, for most coins. BTC and Eth, at least, are simply too slow for everyone to have their own wallet and do their own on-chain transactions, even if rarely, if we imagine they will ever reach some significant portion of the population.

And LN doesn't solve this in any way, before anyone claims otherwise.

dannyw• 4 years ago

Incorrect. Bancor, the first DeFi protocol and ICO, is in deficit (liabilities exceed assets).

They offered 100% impermanent loss protection. Now, liquidity providers like me who deposited ETH are down 50%.

It's only about a $18 million hole, but the Switzerland "non-profit" Bancor Foundation that has raised hundreds of thousands of ETH in ICO is nowhere to be seen.

WXLCKNO• 4 years ago

100% impermanent loss protection seems like a fundamentally flawed concept.

At least it seems too good to be true.

null0pointer• 4 years ago

Ethereum was the first ICO.

Wertigoyr2• 4 years ago

Funny how you just list so many different things and don't think that alone might ne a neck breaker.

m3kw9• 4 years ago

I thought FTX is bailing out everybody

aaaaaaaaata19• 4 years ago

s/bailing/buying

tim3339• 4 years ago

The guy looked and specifically said not Celcius. - https://uk.investing.com/news/stock-market-news/sbfs-ftx-con...

fourseventy• 4 years ago

"wrapped bitcoin (wBTC) and a type of staked ether derivative (stETH)." Wtf is all if this crap? Feels like 2008 with piles of CDOs and weird derivatives

wmf3• 4 years ago

Creating cool derivatives is one of the purposes of DeFi.

BTC only exists on the Bitcoin blockchain but since Bitcoin doesn't really have smart contracts people "wrap" it into wBTC on Ethereum. I guess this is akin to a eurodollar.

stETH is like a bond or certificate of deposit where you can lend ETH to be staked and receive a liquid claim against it.

oliwarner• 4 years ago

And $720M in mining assets.

I say creditors get to beat them with sticks until it starts raining graphics cards.

RichardHeart• 4 years ago

I specifically warned everyone and begged them to remove their funds from there. For years...

mouzogu• 4 years ago

when i saw that the former head of institutional lending of celsius was in a porno i realised to stay away from this dodgy company.

Celsius acknowledges $1.2B hole in balance sheet

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