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Celsius virtual currency loan platform bankruptcy storm Hong Kong sufferer: "greed for high interest rates"

2022-07-16T05:14:57.853Z


Celsius, one of the world's largest cryptocurrency platforms, filed for bankruptcy protection in a New York court today after it announced last month that it would freeze user withdrawals, currency exchanges and transfers after falling into a "run" crisis earlier. Celsius around the world


Celsius, one of the world's largest cryptocurrency platforms, filed for bankruptcy protection in a New York court today after it announced last month that it would freeze user withdrawals, currency exchanges and transfers after falling into a "run" crisis earlier.

Celsius has millions of users around the world, with deposit assets of tens of billions of dollars. Some Hong Kong users admitted that they "greed for high interest" to open an account on the same day, and it was an accident that they could not transfer all their cryptocurrency deposits.


Since Celsius suffered a withdrawal this year, it froze user withdrawals last month, and has not been able to return funds to users. As of May 17 this year, the platform held user assets of 11.8 billion US dollars, but only 170 million in cash. Dollar.

According to a press release provided by Celsius, it and its subsidiaries today (14) filed a voluntary reorganization petition under Chapter 11 of the U.S. Bankruptcy Code with the U.S. Bankruptcy Court for the Southern District of New York.

Its submission will be an "opportunity to stabilize its business" and undertake a restructuring "to maximize value for all stakeholders".

However,

the financial deficit was close to $1.2 billion, according to a balance sheet provided by Celsius, which it stated was due to "bad" investments and other "unexpected" losses

.

Alex Mashinsky, CEO of Celsius, who co-founded Celsius in 2017, filed a 61-page bankruptcy filing in court on Thursday, showing the company had only $4.3 billion in assets and $

5.5 billion in liabilities, the vast majority of which belonged to the company. Users of the platform, accounting for $4.7 billion, customers will be creditors.

Celsius has more than 100,000 creditors, it is reported.

"The platform's digital assets grew faster than the company was ready to deploy. As a result, in hindsight, the company made some poor asset deployment decisions," Masinski wrote in the article.

Pictured here is Celsius founder Alex Mashinsky (right) at a public event in early May 2022 (FB@Celsius)

One of them is a $510 million loss in 2021 when Celsius tried unsuccessfully to recoup the collateral it borrowed from an unnamed private lending platform.

Additionally, Celsius had losses involving $100 million in collateral from loans to another stablecoin issuer, Tether.

Mashinsky also pointed out that Celsius has about $1 billion of funds that have not been turned around because of the Bitcoin (Bitcoin) mining project and the yet-to-be-launched version of the Ethereum network.

This New Jersey-based virtual currency platform is the most popular cryptocurrency investment platform in recent years. It

attracts users to deposit cryptocurrency with super high interest rates, and the interest rate for depositors can be as high as 18%.

Lenders like Celsius take deposits from customers and lend money at higher interest rates, profiting from the difference.

In order to attract investors, Celsius offers high interest rates and claims that the risk is low, and there are a large number of online KOLs touting their high interest rates.

But Celsius has taken on increasing financial risk in recent months, based on the cryptocurrency’s sharp fall in prices this year and weaker demand for loans from institutional investors.

The Celsius virtual currency lending platform attracts customers to deposit cryptocurrencies with high interest rates, and then lend the money.

(Celsius webpage)

Worry about not knowing where to store it to be safe

Celsius also has many users in Hong Kong, which are also affected by the account freeze.

Affected Celsius user Ms. Chen revealed to Hong Kong 01 that after the Luna coin plummeted in May, she began to hear on the Internet that some KOLs in the currency circle expressed concern about the financial instability of Celsius, so she immediately took up the majority of her Celsius account The bitcoins were transferred to other platforms, but there were still USDC worth about several thousand Hong Kong dollars too late to withdraw, and the account was frozen last month.

"I was greedy at first, and I saw the high interest rate, so I gave it a try." Ms. Chen opened a Celsius account in the middle of last year, mainly depositing bitcoins. , but I believe it is only "on the books", and it is difficult to estimate whether the funds can be recovered.

Ms. Chen believes that Celsius, as a larger platform, has fallen, and smaller cryptocurrencies seem to be more untrustworthy.

She also said that she had opened an account and made a deposit on a local cryptocurrency platform, but she had also transferred the funds for fear of "unstable battle".

"The biggest question now is where do you keep your money (cryptocurrency) safe?"

The current plight of a number of major players in the cryptocurrency market also highlights the lack of legal and financial protections for cryptocurrency investors.

If regulated banks and brokerage firms fail, the authorities will have corresponding protection mechanisms activated, but this does not apply to cryptocurrency users.

Cryptocurrencies, led by Bitcoin, have plummeted in value this year.

(AP)

Cause a ripple effect?

The Wall Street Journal reported that the decline in the value of cryptocurrencies this year has sent ripples through the entanglement of cryptocurrency companies that have borrowed and borrowed from each other.

Voyager Digital Ltd., a virtual currency lending company, also filed for bankruptcy protection last week; cryptocurrency hedge fund Three Arrows Capital Ltd. has been ordered to liquidate; another virtual currency lending platform, BlockFi, is also in financial trouble and recently agreed to be funded by cryptocurrency exchange FTX. Acquired at a maximum of $240 million, far below the previous valuation of $4 billion.

Unlike bank deposits, users of these virtual currency lending platforms are also not protected by laws such as federal deposit insurance in the United States.

When Celsius announced a freeze on user payments last month, securities commissions in several U.S. states launched investigations, but with Celsius now filing for bankruptcy protection, state regulators’ enforcement actions may be halted.

Users far away from Hong Kong are even more helpless.

"I can't do anything now. I just blame myself for being stupid and not transferring the money as soon as possible." Ms. Chen admitted that there was no way to recover the money. She also pointed out that there is a crisis of confidence in the currency circle now. Once a certain platform is unstable on the Internet, It may trigger a squeeze, and the first user will be able to escape, but the subsequent losses may be heavy.

Celsius, the virtual currency lending platform, files for bankruptcy. If it gets bankruptcy protection, customers will become creditors. Celsius stops withdrawals.

Goldman Sachs reportedly plans to raise $2 billion from investors to buy assets when Celsius declares bankruptcy

Source: hk1

All news articles on 2022-07-16

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