Celsius (CEL-USD) isn’t looking to fall into the bankruptcy trap — something its peers have been doing a lot in recent months. It has been teetering on a precipice, owing some hefty debts across the market. Today, though, the Celsius network comes another step closer eliminating these debts. A large payment to the Aave (AAVE-USD) network leaves it almost financially free from the platform. It’s also allowing Celsius to get its hands back on a sizable stash of staked Ethereum (ETH-USD) tokens.
Celsius is one of the most notable crypto fund managers and DeFi platforms on the market. At its peak, the platform managed $20 billion in assets through its trading, lending and staking platforms. But with the recent crypto crash, it has been tumbling quickly.
With the collapse of the cryptocurrency market, Celsius found itself in a load of debt with other DeFi service providers. A total of $258 million was owed by the company to Aave and fellow DeFi platform Compound (COMP-USD). Another $223 million was owed to the MakerDAO (MKR-USD) ecosystem.
With these debts at hand, Celsius faced an all-too-real possibility of bankruptcy. Fellow asset managers Three Arrows Capital and Voyager Digital both declared their own bankruptcies late last June.
This pushed the company toward some methods of asset protection that investors found less than ideal. This included a withdrawal halt issued with the goal of preserving the network’s liquidity. While effective, it drew the ire of the half a million users who could not take their assets off-chain during the market crash.
Celsius Network Continues to Avoid Bankruptcy
Last week, the Celsius network was able to scrape together enough funds to pay down its $223 million debt owed to Maker. In return, it received $450 million that it put down in collateral. Immediately, the company took those funds and put down a $950 million collateral to Aave and Compound. This week, we see the company aggressively pushing to get those debts off its chest.
In addition to hiring a new legal team meant to help it avoid bankruptcy at all costs this week, Celsius is chipping away at its debt to Aave and Compound. Yesterday saw the company pay Aave $20 million of its debt. Today, it is paying down another $81 million. After initiating this payment, Celsius reduced its outstanding debt to Aave to just $8.5 million. It also freed up another $410 million in collateralized staked ETH tokens.
All in all, Celsius only owes about $59 million more in debt between Aave and Compound. Unfortunately for the company, though, a setback looms. Celsius is being sued by DeFi company KeyFi after it allegedly refused to honor a deal between the two.
KeyFi had been investing Celsius’ funds in high-risk leveraged trades. While the two apparently agreed on a percentage of profits that KeyFi would earn, KeyFi alleges Celsius refused to stick to the agreed-upon figure. Now, the company is taking Celsius to court. It’s making bold claims that Celsius is a Ponzi scheme — a new roadblock the company will need to reckon with in the future.
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.
