Celsius Network: crypto firm reveals $1.2bn deficit in bankruptcy filing

theguardian.com:

The cryptocurrency platform Celsius Network was left with a $1.2bn (£1bn) deficit after suffering from a digital version of an old-fashioned “run on the bank”, according to its bankruptcy filing in the US.

Blaming a combination of its own poor decisions, a global “cryptopocalypse” and unfavourable media coverage, the company filed for Chapter 11 – a US process that allows companies to trade while restructuring their finances.

Celsius froze customer funds last month as investors raced to withdraw their assets, amid a crash that saw the value of cryptocurrencies tumble worldwide.

The filing revealed that the company has $4.3bn of assets, set against liabilities of $5.5bn, of which $4.7bn is owed to its users, who numbered 1.7 million as of this month.

In a 61-page document, its chief executive, Alex Mashinsky, admitted the company had “made what, in hindsight, proved to be certain poor asset deployment decisions”.

These included giving 35,000 of the digital currency Ether to a company called StakeHound, which then lost them due to an alleged error by a third company storing the assets, Fireblocks. StakeHound last month issued a suit in Tel Aviv against the Israel-based firm for negligence, which Fireblocks denies.

Celsius also borrowed from a private lender between 2019 and 2021, only to find when it tried to repay the money that the lender was unable to return the collateral that Celsius had put up to secure the funds.

The cryptocurrency platform, which was valued at $3bn at one point last year, is owed $439m by the lender, $361m of it in cash and the remainder in bitcoin.

Weakened by missteps such as these, Celsius said that it had been putting plans in place earlier this year that it believed would have “succeeded in the near