CELSIUS NETWORK

DESCRIPTION OF EVENTS

"Celsius Network is a cryptocurrency loan company." "Celsius was founded in 2017 with the mission to harness blockchain technology to provide unprecedented financial freedom, economic opportunity, and income equality for the 99%." "Celsius Network was founded in 2017 by Alex Mashinsky, Daniel Leon, and Nuke Goldstein." "Celsius Network Limited was incorporated on 9 February 2018."

"Celsius is proud to provide a platform of curated services that have been abandoned by big banks – things like fair interest, zero fees, and lightning quick transactions. Our goal is to disrupt the financial industry, one happy user at a time, and introduce financial freedom through crypto." "Access your coins whenever, keep them safe forever."

"If you don't have free and unlimited access to your own funds, are they really *your* funds? #UnbankYourself with Celsius and join the next generation of financial services - no fees, no penalties, no lockups, just profit."

"New Jersey-based Celsius, which has around $11.8 billion in assets, offers interest-bearing products to customers who deposit cryptocurrencies with its platform. It then lends out cryptocurrencies to earn a return." "Celsius allows users to deposit their Bitcoin, Ethereum, and Tether and receive weekly interest payments. Depending on the period and the token, the platform offers an interest rate of 18% yearly. On its website, Celsius says 1.7 million people call “Celsius their home for crypto.”"

"Celsius is not a bank, depository institution, custodian or fiduciary and the assets in your Celsius account are not insured by any private or governmental insurance plan (including FDIC or SIPC), nor are they covered by any compensation scheme (including FSCS)."

"[T]he platform began pursuing increasingly risky strategies starting in early 2021, including sending client funds to volatile DeFi “yield farms,” later including Luna’s Anchor protocol. Though Celsius apparently withdrew funds from Anchor before the Terra collapse, the general investment strategy could face scrutiny in court."

"In September 2021, authorities in a number of US states said that Celsius's interest-bearing cryptocurrency accounts constitute an unregistered securities offering. The attorney general of New Jersey ordered Celsius to stop issuing interest-bearing cryptocurrency products via a cease-and-desist order. Texas state regulators filed a notice seeking a hearing in February 2022 to determine whether to take similar action. Kentucky's securities regulator told Celsius to cease and desist from offering its interest paying accounts in the state. Celsius CEO Alex Mashinsky said he was "very confident" that none of Celsius's products in the United States were securities. Celsius said it was working with US states in order to provide clarity about its business operations."

"”In regard to Celsius, if yield generation strategies are too good to be true, that is because they probably are," FSInsight said, adding that the crypto lender was “notorious for promoting ‘risk-free’ yields on client assets” that required huge amounts of leverage coupled with risky and illiquid staking mechanisms."

"@CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community."

"“We take this action today to put C Netwwork in a better position to honor, over time, its cash-out obligations,” wrote Celsius, stablecoin issuer Tether International and pension fund Canada Caisse de Dépôt et Placement du Québec among its investors."

“Action for the benefit of the community is our top priority. To support that commitment and comply with our risk management framework, we have activated a provision in our Terms of Use to allow this process to take place. Celsius has valuable assets, and we are working diligently to meet our obligations.”

"We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets. Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers."

"We understand that this news is difficult, but we believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community. We are working with a singular focus: to protect and preserve assets to meet our obligations to customers. Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possible. There is a lot of work ahead as we consider various options, this process will take time, and there may be delays."

"Almost anything can be systemic in crypto ... because the whole space is over-levered," said Cory Klippsten, chief executive of Swan Bitcoin, a bitcoin savings platform. "It's all a house of cards."

"There must be many users who are in a position of leverage and desperately need those funds from Celsius, now locked away. I’m sad we’ve gotten here. Protect yourselves."

"I have USDC in my account that I want to use to repay my loan that has a margin call right now, but I can't even repay the damn loan because of the transfer freeze. That's ridiculous. If the market tanks, celsius will liquidate my collateral even though I can pay off my loan!!!"

"One early, if flaccid, signal came from YouTube influencer BitBoy, who last week announced his intent to file a class action against Celsius after it froze his funds. Just days later, BitBoy withdrew the proposal after remembering that he had been paid to promote Celsius."

"In a blog post on Monday, Tether said that while it has invested in Celsius, its lending activity with the crypto platform has "always been overcollateralized" and has no impact on Tether's reserves. The token was last trading flat at $1."

"While Tether’s investment portfolio does include an investment in the company, representing a minimal part of our shareholders equity, there is no correlation between this investment and our own reserves or stability. Also Tether lending activity with Celsius (as with any other borrower) has always been overcollateralized and has no impact on our reserves."

"Celsius's token has fallen about 97% in the last 12 months, from $7 to around 20 cents, based on CoinGecko data." "While short traders attempted to capitalise on the struggling CEL token, #celshortsqueeze started trending on Twitter as Celsius community members attempted to resuscitate the value of the token." "As of Monday July 4, CEL was 36% up over the two-day period."

"Rival crypto lender Nexo said on Monday it had offered to buy Celsius' outstanding assets. "We reached out to Celsius Sunday morning to discuss the acquisition of its collateralised loan portfolio. So far, Celsius has chosen not to engage," said Nexo co-founder Antoni Trenchev."

"Embattled crypto lending platform Celsius Network paid back another $50mln of its nearly $200m debt tied up in MakerDAO, effectively increasing its collateralisation ratio by 80% as of July 4." "The UK-registered enterprise was at risk of having its position liquidated as Bitcoin (BTC)’s price continued to plummet by 60% in the first two quarters of 2022."

"Despite lowering its liquidation price to US$11,865 (the price that BTC needs to fall to for Celsius to default), users’ funds remain trapped in the lending platform."

"Despite Mashinsky’s repeated and vocal jabs at the traditional finance sector (“Banks are not your friend” being his personal motto), Celsius appears to be in talks with Goldman Sachs (NYSE:GS) regarding a US$2bln buy up of distressed assets."

"Celsius has engaged restructuring consultants Alvarez & Marsal on the matter."

"Celsius is considering all of its options, including strategic transactions, as well as a restructuring of its liabilities." "We plan to continue working with regulators and officials regarding this pause and our company’s determination to find a resolution." "[It] was also reported that Celsius laid off approximately 150 employees as the company fought off insolvency." "Proactive Investors learned that Celsius’ London office was vacant when approached for comment."

"Celsius [and] its outspoken founder and chief executive officer Alex Mashinky have been relatively moot on the company’s roadmap out of the quagmire, leading to a conversation rife with rumour and speculation."

"We continue to take important steps to preserve and protect assets and explore options available to us. These options include pursuing strategic transactions as well as a restructuring of our liabilities, among other avenues. These exhaustive explorations are complex and take time, but we want the community to know that our teams are working with experts from many different disciplines."

"Our team is working diligently around the clock. We will continue to update the community and our clients as and when it becomes appropriate." "We are pausing our Twitter Spaces and AMAs to focus on navigating these unprecedented challenges and seeking to fulfill our responsibilities to our community."

"We thank the incredible Celsius community for your support today. It is our pleasure to serve you. Our operations continue and we will continue to share information with the community as it becomes available."

Celsius Network is a cryptocurrency lending platform, where you can deposit your cryptocurrency and take out a loan against it. After a series of risky investments using customer funds, as of June 12th, it appears that the platform has now prevented all customer withdrawals and transfers. The company is reportedly looking into different options to restructure the service. Customers are even unable to transfer existing assets to add collateral to loans. It remains to be seen what portion of the $11.8b in customer assets will be retrievable.

HOW COULD THIS HAVE BEEN PREVENTED?

The primary challenge is that the Celsius platform does not have a proper backing of customer funds. There is no visibility into the fund backing outside of the company itself, and it certainly falls short of multiple rotating validators. The situation has become increasingly worsened over time.

The use of a multi-signature wallet could also provide additional scrutiny to reduce the risk. Presently, it is unclear how such decisions were made.

Check Our Framework For Safe Secure Exchange Platforms

Why Celsius Fell Apart - YouTube (Jun 19)
Celsius Troubles, UST Collapse May Help Crypto Long Term, FSInsight Says (Jun 19)
Did Celsius’ Withdrawal Trigger The Terra/ LUNA Collapse? Claim & Response - CoinYar (Jun 19)
Celsius Network | Earn Crypto, Borrow Cash and Unbank Yourself (Jan 30)
About Us | Unbank Yourself (Jan 30)
Is Celsius Network Safe To Put Your Money (Updated Dec'21 on BadgerDAO) (Jan 30)
Celsius Facing "Default"? - CoinCu News (Jul 12)
@ledgerstatus Twitter (Jul 12)
@CelsiusNetwork Twitter (Jul 12)
@CelsiusNetwork Twitter (Jul 12)
https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6 (Jul 12)
https://blog.celsius.network/community-faq-510f9996d94c (Jul 12)
https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998 (Jul 12)
https://blog.celsius.network/across-celsius-today-c71b29513a9b (Jul 12)
Crypto contagion fears spread after Celsius Network freezes withdrawals | Reuters (Jul 12)
https://tether.to/en/celsius-feels-impact-of-market-volatility-tether-reserves-hold-strong/ (Jul 12)
Celsius Network - Wikipedia (Jan 30)
Celsius Network Review: Safe Platform? This You NEED To Know!! (Jul 12)
The Case for Suing Celsius, Terraform Labs (Jul 12)
What Crypto Lender Celsius Isn’t Telling Its Depositors (Jul 12)
Why I'm allowing my Celsius loan to default... | CoinMarketBag (Jul 12)
The Crypto Collapse Just Got Worse - YouTube (Jul 16)
@coffeebreak_YT Twitter (Aug 31)
Jail he should be. : Bitcoin (Oct 3)
https://www.proactiveinvestors.ca/companies/news/986546/celsius-user-funds-remain-in-the-balance-as-partial-debt-repaid-986546.html (Oct 19)
Celsius Network Plots a Comeback After a Crypto Crash - The New York Times (Nov 30)
Celsius Execs Cashed out $17 Million Before Halting Withdrawals (Dec 15)
https://www.nj.gov/oag/newsreleases21/Celsius-Order-9.17.21.pdf (Dec 15)
Bankrupt Crypto Lender Celsius' Asset Sale Is Scheduled, Sources Say FTX CEO May Bid – Bitcoin News (Dec 15)
@CoinMarketCap Twitter (Jan 6)
No regulation doesn't justify a scam : CryptoCurrency (Aug 18)

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