July 2022 – Celsius Network has disclosed a $1.2 billion net liability position on its balance sheet, caused by a string of “poor” investments and “unanticipated” losses per CEO Alex Mashinsky.
The magnitude of the weak balance sheet came to light when Celsius filed for US bankruptcy, after pausing customer withdrawals in June 2022. The crypto market has been in a significant downfall, with several big name crypto firms struggling to stay afloat, particularly those that borrow and lend crypto like a bank.
The filing for bankruptcy included a 61 page court submission which revealed liabilities of $5.5 billion and assets of $4.3 billion, a net liability of $1.2 billion. Of the liabilities, $4.7 billion is owed to customers who are demanding for their deposits to be returned.
The financial stress of Celsius has been attributed to a string of poor decision making and risk taking – Bad Debts has soared due to poor market conditions and growth has slowed to a crawl. A list of loss making illiquid investments has also contributed to the file of bankruptcy from the weight of customer withdrawals.
Mr Mashinksy stated: “The amount of digital assets on the platform grew faster than the company was prepared to deploy. As a result, the company made what, in hindsight, proved to be certain poor asset deployment decisions.”
In addition, $1 billion was invested in mining operations of Ethereum network which is a long term play.
Promising returns as high as 18 per cent, Celsius was able to attract billions of dollars from ordinary investors.
Celsius began in 2017, co-founded by Mr Mashinsky. It was valued at $3 billion in 2021 based on an equity raising round with Caisse de depot et placement du Quebec and WestCap.