Topic: Crypto lender Celsius mulls possible restructuring amid financial woes - page 8. (Read 3112 times)

I had some sats on celsius, so I tried to fill the online form on stretto. But I'm not a lawyer and I'm not sure I made everything correct.

Also, there isn't any place where to put a bank or bitcoin address, are they supposed to refund customers using their celsius wallet or it is simply too early?

The statement that tether made was clear that there was a written agreement regarding the collateral. The statement also says that the excess collateral was returned to celsius after the collateral was used to repay the loan, which implies that tether had possession of the private keys associated with the collateral.

It is also unclear as to when the loan was made. If it was made prior to when el Salvador made bitcoin legal tender, there would be an argument to say that a different standard would be needed to perfect their security interest.

Based on the total assets and total liabilities of celsius, unsecured credits will theoretically get about $0.78 for every $1.00 in unsecured claim, provided that celsius does not see additional losses. If you assume that tether did not perfect their security interest, there is an implied ~$183 million in losses to tether.

I do not doubt that tether had assistance from legal counsel with drafting an $800 million loan agreement. I would tend to err on the side of that tether had a perfected security interest in the collateral.

Here's an interesting take: https://archive.ph/y56hb (Financial Times article, archived to bypass paywall).

I'd recommend reading the whole article, but here are a few relevant snippets:

So, within the 90 days before Celsius declared bankruptcy, Tether liquidated bitcoin from Celsius to the tune of $840 million that they were holding as collateral to a USDT loan they had given Celsius. Because this was within 90 days, it falls under the "preference" clause of the Chapter 11 bankruptcy, meaning this value can potentially be recovered. Tether's argument will obviously be that the loan was secured, but the counter argument here is that simply handing over collateral does not mean a loan is secured and it is unclear whether all the necessary paperwork was properly filed. If it wasn't, then Celsius could potentially recover the value of this loan to be added to their pot of assets to be redistributed, and Tether would be left with a $840 million hole in their finances as well as being relegated to the bottom of the pile of "unsecured creditors" who will receive pennies on their dollar when Celsius' assets are divided up.

The outcome here will be extremely interesting, as it would almost certainly apply to all the other platforms who have been handing out loans that they are calling "secured", when in actual fact they may not be at all.

I really am not sure. I await an explanation from Celsius and/or a report from the bankruptcy trustee to find out what specifically happened to cause the deficit.

It is possible that a number of things caused the deficit. I would note that banks typically will classify a specific loan as "doubtful" to be fully collected once particular criteria are met, and generally one of that criteria is delinquency past a certain threshold.

Because banks have a different model when handling unsecured loans and unlike Celsius, they have a way to get that money back, Celsius loaned money to people that might now even exist at all with the amount of fake complete identities that are sold for 50$ right now.


Alleged!
And it can also be alleged that they paid, as o_e_l_e_o mentioned extreme rates upfront, and I might add, even before that money would produce anything just in order to increase their customer numbers and amount of funds on hand. Seeing that they've inflated those numbers by at least 5 already, this is another hint at them expanding without any proof of actually having the deals that generate the revenue keeping the pace.


Nobody has problems until they have problems!
I'm really getting curious why you're clearly defending their way of doing business without knowing for certain a single fact but at the same time, you completely deny any other scenario for this just because there aren't any solid proofs.


It wasn't "immediately" prior but almost a month.
Interesting, you can see the imbecile right here, after the Terra crash advertising both lending, staking, and their new card product as if nothing has happened.
So, it's one or the other
- Celsius had no problem caused by Terra and the reason for the fall is a Ponzi scheme
- The reason for the fall is Terra and the altcoins drop, but their CEO is a lying PoS, and if he knew he is insolvent at that time him trying to advertise his business to attract customers was surely a way to plug the hole, which is again a Ponzi way of dealing with losses.

No, but as I said above, a $1.2 billion deficit doesn't happen overnight. It is safe to assume there were problems behind the scenes for several weeks.

Terra collapsed on May 10th, while Celsius suspended all withdrawals on June 13th. That's a full month they continued to advertise to new customers, including specifically denying rumors they were insolvent.

Not just that, but making several public statements on their website, social media, videos with the CEO, etc., specifically stating that the insolvency rumors were FUD. I can't imagine that's legal.

Seems like an accurate take. By accepting deposits they created a need to repay. Then by using those customer funds to profit they turned their depositors into investors and their funds from liquid to illiquid. Without a way for customers to trade their illiquid investment, they became bagholders for a failed business model which continued allowing deposits after being insolvent. I don’t know the laws about accepting new funds once you’re insolvent but I imagine they will be tested in this case.

I don't think we know how long Celsius was having liquidity problems for. I don't remember seeing anything about withdrawals being delayed longer than normal until they were outright halted.

There was chaos in the altcoin market immediately prior to Celsius halting withdrawals. TerraUSD and Luna were both crashing, other stablecoins were trading under $1 (temporarily), and many altcoins were declining heavily. It is possible that Celsius was forced to liquidate collateral at prices below the loan repayment amount during this chaos when there was sufficient collateral prior to the chaos. If this is true, they may have taken a 100% loss on loans backed by Luna and/or TerraUSD.

Sure, but they didn't end up with a $1.2 billion hole in the balance sheet overnight and then shut down withdrawals the next day. They have obviously had major liquidity issues for weeks or months, all the while continuing to advertise and attract new users as well as encouraging more deposits from existing users with their obviously unsustainable interest rates of up to 20% a year. They must have known full well for some time that they would be unable to pay out interest to any new deposits coming to their platform, in which case these new deposits were likely only being used to pay interest on older deposits and keep them afloat while they struggled to secure additional sources of funding.

So no, while their business model is not a Ponzi and giving out unsecured loans is not a Ponzi, I think it is highly likely that they were operating like a Ponzi in the weeks leading up to them suspending all accounts.

That is not what a ponzi is. Banks make unsecured loans all the time and are generally successful in doing so.

A ponzi is a scam in which previous investors are repaid by future investors investing more money. That is not what is alleged to have happened in the case of Celsius. What appears to have likely happened is that they made risky loans that turned bad.

That's exactly what adversary proceedings in bankruptcy are for.
Second, the lawsuit on hand is also against individual defendants if found guilty of misappropriation of funds in the process there we go again, it's another case.


As I was saying, you give away money, you have no collateral and you pay interest hoping you will get your money back with interest on top of that.
Ponzi's macaroni factory!

Follow-up lawsuits? Celsius has negative equity. There is no money to be given to plaintiffs if they lose any lawsuits. The people that will win in any lawsuit against Celsius are the lawyers, and this is true regardless of the outcome.

They appear to have loan losses that exceeded their estimates. This could have been because they made a number of loans not fully secured by collateral they do not expect to be repaid, or it could have been because they made a number of loans whose collateral value fell below the repayment amount before it could be liquidated, and do not expect these loans to be repaid, or it could be a combination the two.

Of course, this is not a trial about establishing Celsius is a Ponzi scheme, but the results and evidence presented will matter if there are any follow-up lawsuits.

The plaintiff can simply make accusations based on the numbers at hand that Celsius has gone outside their promise and has invested in risky assets with no collateral, it can accuse Celsius from multiple angles of everything, including the misleading numbers on stablecoins returns which makes zero sense confronted with their own statements on their business model and contradictory statements in press releases.
We already know that Celsius had gone bankrupt, and we know that it has lost investors' money, this is not about establishing who's guilty but how much guilt we're talking about.

The "I didn't do it" doesn't work here if for clarification the judge asks for any documents or statements Celsius will have to come up with numbers, and if those numbers

Quote from: PrimeNumber7 on July 20, 2022, 06:10:22 PM

They were essentially a bank. They took deposits and paid interest on those deposits at rates less than the rates they were lending the deposits out at, and were pocketing the difference, less any loan losses./quote]

That's the stated business model, and it's clear they didn't do that otherwise they wouldn't be bankrupt as there is no fucking way you lose money when you give back 50 cents to a dollar.

I am not sure how many ETH and BTC Celsius have in their various wallets. It appears they have approximately $1.75 billion worth, according to a financial statement posted above.

You are basically mirroring what happened with MtGox in their multi-year bankruptcy proceeding in Japan. In the Gox case, customer deposits were converted into fiat liabilities, and over the course of several years, the value of the coin being held by Gox increased.

I am not sure how liabilities denominated in various crypto will be handled in US bankruptcy court. Various loans, and losses are being described in terms of dollars, however, I would believe that the loans, and collateral are denominated in terms of various coins.

While it does appear likely that the underlying root cause of Celsius' collapse was that of a bad loan to a hedge fund that failed, we do not know with certainty why Celsius has such a large hole in their balance sheet. If Celsius has already liquidated collateral at prices less than the loan repayment amounts, they will likely not benefit from any increase in crypto prices.

They were essentially a bank. They took deposits and paid interest on those deposits at rates less than the rates they were lending the deposits out at, and were pocketing the difference, less any loan losses.

It is up to the Plaintiff to prove their case, not the defendant.

It appears that employee payroll is expected to be ~$3.4 million to employees for the 30-day period following Celsius filing for bankruptcy.

My assumption is that those employees are performing work for Celsius, and without that work, Celsius would incur losses greater than the salary being paid.

Weekly payroll to Celsius employees. Considering those are weekly values, it must stay around 16,724,008$ a month.
That is not the expected behavior from a company claiming to be trying to recover itself from bankruptcy and acting at the best interest of the community. The directors and employees are simply milking most money they can from the remaining funds for themselves, while it's still possible, and at same time deluding depositors to believe there is a recovery plan in mind.

Imagine how many small depositors from the total 300,000 ones (with more than 100$ invested) could be paid with those funds already.


https://twitter.com/TheFinancer/status/1549765438128652289

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Recent updates from the first day hearing (which ocurred last Monday) said there is going to be an option for investors to choose receiving part of their assets back with a haircut, without waiting longer. The other option is a long term recovery which is totally uncertain.

What do you call offering high-profit rates if you lock your deposits for a limited time and then pay indeed for a while those returns till ..there is no money left?
As for bad investments, it's still a bit foggy but I can see a small resemblance between investing in cryptodickbutts and hoping that a macaroni factory would be able to pay $20 million (in 1920)  

Right now with the lawsuit it's Celsius who will have to prove they are not a Ponzi, and they are going to have to come up with proof of how they expected to generate those returns, and no judge will believe them if they will try to weasel their way out by saying they believed those assets will rise in value and so on. Otherwise, you could start offering 50% a day and your excuse would be that you know think the moon plot you've bought will go up 1 quadrillion times because there is gold under it.


Yup, postal reply coupons! 400% profits from arbitrage, no risks.

Impossible to say for two reasons: We don't know how much of each crypto they are holding, and we also do not know how much of their outstanding liabilities are denominated in crypto (or in which crypto), as opposed to in fiat. If I loaned Celsius $20 million which they used to buy bitcoin, and they later return that $20 million (plus interest) by selling a small portion of that bitcoin which has since gone up in fiat value, then sure, that's fair. If, however, I loaned Celsius 1,000 BTC when BTC was $20,000 (for a total value of $20 million), I'm not exactly going to be happy with Celsius repaying that loan by paying me back 400 BTC when BTC is $50,000 and calling that fair.

@PrimeNumber7. How much coins in Ethereum and Bitcoin is Celsius holding in their wallets? If the whole cryptospace pumps with both of those coins going 3x from where they presently are, I reckon Celsius might have enough to pay back their depositors and have some extra profit in dollars hehehehehe.

I am sure that he was paid well during his tenure, so even if the reports are false, he is likely to be okay financially. It is pretty rare for someone who once ran a business to not try again.

Luna is probably off topic here, but its recent collapse was not the first time that something similar had happened to a stablecoin that was not backed by actual assets. I don't think Luna's model is sound because someone can bring down the coin by buying up a lot of it over time, and quickly dumping it onto the market, causing its dollar peg to break, removing confidence in the coin.

The automatic stay from the bankruptcy filing will put the lawsuit on hold. I am not aware of any evidence that Celsius was a ponzi. I think it is more accurate to say that Celsius made risky investments (loans) that turned bad.

Reports are that he sold around $45 million worth of CEL tokens he had very kindly given himself prior to collapse, so I'm sure he'll be fine. Although no doubt he will launch Celsius 2.0 or some other bullshit and people will flock to it. I mean, just weeks after the scam that was Terra Luna collapsed to nothing, Terra Luna v2 has a volume of $90 million a day. There are plenty of people in this space who are beyond stupid, and immoral people like Mashinsky are all too happy to capitalize on that stupidity.

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Looks like Celsius are being served a class action lawsuit: https://www.johnreedstark.com/wp-content/uploads/sites/180/2022/07/CelsiusClassAction.pdf