The Celsius (CEL-USD) bankruptcy saga is already a warning shot to the cryptocurrency industry. No longer viable are the days of over-leveraged loans made to support high-risk investing. The milk and honey days of decentralized finance (DeFi) are coming to an end. And companies like Celsius are proving it. This week, that saga continues to unfold as the Celsius bankruptcy filing reveals the scope of the company’s poor decision making.
Since its controversial decision to freeze withdrawals from its platforms, Celsius has been fighting an uphill battle to keep itself alive. The company did this in the first place to try and get a rein on its rapidly depleting liquidity; turbulence caused by the company’s exposure to Luna Classic (LUNC-USD) has been detrimental, to say the least.
When the market began to really tank, Celsius found itself missing margin call after margin call from creditors, plunging it into severe debt. Though, the full scope of this debt was not yet known. With over 100,000 creditors, though, it was likely that the company would be going bankrupt.
Against these overwhelming odds, Celsius has spent recent days aggressively paying down as much of this debt as it could. The company has ended up fully erasing $800 million in debt owed across three DeFi lending platforms — Aave (AAVE-USD), Compound (COMP-USD) and MakerDAO (MKR-USD). Recouping $1 billion as a result of the repayments, the company also hired a new legal team, with the hopes of circumventing a bankruptcy filing entirely.
Unfortunately, though, things aren’t looking much better for the company. In addition to a lawsuit filed against the company by a business partner, Celsius has also filed for Chapter 11 bankruptcy protection on Thursday. The company has been tight-lipped about the state of its balance sheet. Though, investors are getting a look at the damage today.
Celsius Bankruptcy Filing Shows the Company in a $1.2B Hole
Celsius is notorious for its unwillingness to disclose its financial records. The company allegedly even passed on a $6 billion bailout because of its dedication to privacy. This week sees some of its financial records finally coming to light though, courtesy of the Celsius bankruptcy filing.
What has Celsius been hiding all this time? Well, it looks like it is in quite a hole. Indeed, the company’s liabilities outweigh assets by a cool $1.2 billion.
Across the 100,000 creditors who still require repayment, Celsius owes $5.5 billion. Of course, this figure could be far worse; after all, it did pay off $800 million and free up $1 billion in collateralized assets. However, even with the additional $1 billion back in its hands, the company’s assets only add up to about $4.3 billion.
One interesting development from the news is the revelation that Celsius owes over $12 million to Sam Bankman-Fried’s Alameda Research. Rumors suggest that Bankman-Fried refused to bail the company out due to what was a $2 billion hole at the time. These rumors could lend well to Celsius’ refusal to disclose the information to other companies offering a bailout.
Speaking on how it got itself to this point, the company notes in its filing that it made what “proved to be certain poor asset deployment decisions.” The market crash had amplified these poor decisions, leaving the company with its disproportionate liabilities.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.