Celsius Saga And Bankruptcy

July 15, 2022

Darko Simunovski

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Tokenpaddock is informational and educational website that provides on-line courses and workshops. In our educational program, our students are strongly advised to keep their assets in non-custodial wallets, (hotwallet) digital wallet or hardware wallet (coldwallet) because thats the only way to really own those digital assets/ cryptocurrencies. Unfortunately only small percentage of crypto holders use this kind of wallets, as people find centralised exchanges or centralised lending platform (like Celsius) more convenient to use, because learning about DeFi and non-custodial wallets use is considered as time consuming.

https://celsius.network/

there has been big misunderstanding about the difference between money and currencies. Money is medium of exchange that holds its value in time, where fiat currencies are loosing their value year after year.

Millions of people have already lost their funds simply because of the lack of EDUCATION and many more will loose their assets in the near future.

Celsius is centralised lending platform that operates like a traditional bank, but for crypto, rather than fiat currency. Celsius claimed that it had 1.7 million users and $11.7 billion worth of assets under their management, according to their report in May this year. They also have more than $8 billion in loans, and until recently had offered extremely high annual percentage yields (APYs) of up to 18% on cryptocurrency deposits.

Negative sentiment surrounding crypto was compounded in May when Terra’s stablecoin UST completely collapsed to zero after UST lost its $1 peg. The collapse of Terra’s Luna and UST wiped out more than $60 billion of investors money. Many speculated that Celsius had something to do with the collapse of Luna and UST and they have also announced that they withdraw their funds just days before the disaster.

Celsius has proven many unprofessional managements in the past, with few bad investments using their clients money. On the beginning of December last year, the company has confirmed that the lost assets worth $120m from the latest decentralized finance (DeFi) was due to a hack on BadgerDAO protocol (a lending platform that offers yields and focuses on wrapped bitcoin).

Basic logic tells us a bearish market is bad news for the CEXs and its users, after all crypto is made to be decentralised in any circumstances, but many people find CEX’s more convenient to use because of the simple user interface.

On 20th of May Celsius posted on their Medium blog:

It has been one week since we paused withdrawals, Swap, and transfers. We want our community to know that our objective continues to be stabilizing our liquidity and operations. This process will take time.

On Monday 13th of June, Celsius posted a memo informing users that it had frozen their assets, just one day before the CEO of Celsius Alex Mashinsky was assuring the public that it’s impossible that kind of scenario for their costumers, which is obvious contradiction.

Celsius Lost $350M of Client Funds From ‘High-Risk’ Levered Trading according Arkham Report from earlier this month.

Celsius was the very first centralised platform that paused withdrawals, amidst rumors of the depegging between ETH and staked ETH (stETH). To generate a high yield for users who deposited ETH on Celsius, they had staked a huge proportion of the customers Ethereum funds to Lido Finance, and received staked ETH in return.

On 5th of July, Celsius hired Kirkland & Ellis for advising and filed for Chapter 11 bankruptcy.

On 8th july. Jason Stone CEO of KeyFi Inc. is suing crypto lending platform Celsius for allegedly refusing to honor its contract. Stone is seeking damages for an amount “to be determined at trial.”

Yesterday Crypto lender Celsius Network reveals $1.19 billion hole in bankruptcy filing.

The Celsius Chapter 11 bankruptcy filing confirms its liabilities outweigh its assets by $1.19 billion, this means that Celsius is minus $1.19b on its balance sheet or $1.2 billion short and insolvent.

https://celsius.network/terms-of-use

It is very likely that investors won’t be able to recover their deposited crypto’s/digital assets according to the Term&Conditions of Celsius platform.

Terms and Condition 13th article of Celsius is written:

You will not be able to exercise rights of ownership.

Celsius may receive compensation in connection with lending or otherwise using Digital Assets in its business to which you have no claim or entitlement.

In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, any Eligible Digital Assets used in the Earn Service or as collateral under the Borrow Service may not be recoverable, and you may not have any legal remedies or rights in connection with Celsiusobligations to you other than your rights as a creditor of Celsius under any applicable laws.

In Non-custodial wallet you have sole control of your private keys and cryptocurrency, which it’s like having money in your pocket. On the other hand with a custodial wallet, another party controls your private keys and your cryptocurrencies/assets, just like having money in the bank, so technically you don’t own them.

Its fundamental to understand the difference between being in control of your money or letting centralised exchanges taking control over them for you, which can obviously lead to loosing all of your assets. People have to educate themselves in using non- custodial wallets, so they can protect themselves from cases such as Celsius. Tokenpaddock’s main goal is education of how to protect all of your assets by using non-custodial wallets only, because after all, the main point of cryptocurrencies existence is to be DECENTRALISED!

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