Blockchain News

Taking the Temperature of the Celsius Bankruptcy Case

According to two recent filings, Celsius countersued former partner KeyFi and its CEO Jason Stone, and also attempted to get $17M back from Prime Trust.

How the Mighty Fell

Following to the collapse of Do Kwon’s TerraLUNA and his UST stablecoin and the consequential “extreme market conditions,” the past few months have been marked by a plethora of cryptocurrency service providers suspending their operations. On June 13, popular crypto-lending and staking platform Celsius Network joined this group as it announced the suspension of withdrawals, swaps, and transfers between accounts on its platform, citing the aforementioned “extreme market conditions.”

The June 13 announcement sent the entire market spiraling downwards, making the collapse of Celsius one of the most impactful events in the cryptocurrency ecosystem this year.

What has happened since then?

The Bankruptcy Filings

The Wall Street Journal reported as early as June 14 that the crypto lender had hired restructuring attorneys from the law firm of Akin Gump Strauss Hauer & Feld LLP to advise it on corporate restructuring and possible refinancing.

A month later, on July 14, Celsius filed for Chapter 11 bankruptcy. According to the court documents, the network claimed that its total liabilities were valued at $5.5 billion against its total assets of $4.3 billion, making its deficit $1.2 billion.


However, in a later filing made by the troubled crypto lender on Aug. 14, it was revealed that its total outstanding debt stood at $2.8 billion as opposed to the $1.2 billion initially reported.

According to the coin report contained in the court filing, Celsius also disclosed that it had lost more than half of the 104,962 BTC it had received from Bitcoin investors.


Also, the Monthly Cash Flow Table embedded in the court filing revealed that the troubled lender had a cash balance of $129.8 million at the beginning of this month. But with its current expenditures, it was expecting a liquidity of negative $33.9 million by ending of October.


No Longer Friends

In 2020, Celsius had partly acquired KeyFi, a DeFi aggregator owned by Jason Stone. However, in a quick turn of events, after Celsius suspended operations, Stone sued the failed crypto lender, alleging that it used customers’ deposits to "manipulate crypto asset markets, had failed to institute basic accounting controls which endangered those same deposits, and had failed to carry through on promises."

In response to this suit, Celsius countersued KeyFi and its CEO Jason Stone on Aug. 23, alleging that:

“Stone falsely represented himself as a pioneer and expert in coin staking and decentralized finance (“DeFi”) investments. Unfortunately, Defendants Stone and KeyFi, Stone’s majority-owned corporate vehicle, proved themselves incapable of deploying coins profitably and appear to have lost thousands of Celsius coins through their gross mismanagement. But the Defendants were not just incompetent; they also were thieves.”

Celsius alleged further that KeyFi and its CEO, Stone, stole millions of dollars in coins from Celsius wallets by transferring them to the wallets allegedly controlled by KeyFi and Stone.

The suit also alleged that KeyFi and Stone had used coins belonging to Celsius to “buy hundreds of non-fungible tokens (“NFTs”) and then stole the NFTs they acquired with Celsius’ coins by sending them to wallets that, upon information and belief, they own or control.”

To “cover their tracks and hide the ultimate destination of assets taken from Celsius,” the suit alleged that KeyFi and Stone engaged the use of the now-sanctioned Tornado Cash.

Not Just Stone

Also, on Aug. 23, Celsius filed a suit against cryptocurrency custodian Prime Trust, alleging that the defendant failed to return the $17 million in crypto in its custody. In June 2021, Prime Trust had terminated its relationship with Celsius.

In the new court filing, Celsius alleged that:

“Upon the commencement of these bankruptcy proceedings, Prime Trust was obligated under the Bankruptcy Code to deliver all property belonging to Celsius that is in Prime Trust's possession to Celsius, including these remaining crypto assets, and should be ordered to turn them over now pursuant to section 542 of the Bankruptcy Code.”

According to the court filing, the “property” in question consists of “approximately 398 Bitcoin, 196,268 CEL tokens, 3,740 ETH, and 2,261,448 USDC, collectively worth about $17 million at recent prices.”

(BSC News first learned of the existence of the two recent Celsius filings by way of international finance intelligence site Offshore Alert.)

A Look at $CEL

At press time, the network’s native token, CEL, traded at $1.18, according to data from CoinMarketCap. It had rallied to a high of $4.40 on Aug. 15. It has since declined by 73%, including a 17% single-day drop on Aug. 25.


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