Celsius Platform Withdrawals Paused

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Celsius Network

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.

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

About Celsius Network

Homepage:

Third Party Review:

Wikipedia:

"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."

This exchange or platform is based in United States, or the incident targeted people primarily in United States.

The background of the exchange platform, service, or individuals involved, as it would have been seen or understood at the time of the events.

Include:

• Known history of when and how the service was started.
• What problems does the company or service claim to solve?
• What marketing materials were used by the firm or business?
• Audits performed, and excerpts that may have been included.
• Business registration documents shown (fake or legitimate).
• How were people recruited to participate?
• Public warnings and announcements prior to the event.

Don't Include:

• Any wording which directly states or implies that the business is/was illegitimate, or that a vulnerability existed.
• Anything that wasn't reasonably knowable at the time of the event.

There could be more than one section here. If the same platform is involved with multiple incidents, then it can be linked to a main article page.

The Reality

This sections is included if a case involved deception or information that was unknown at the time. Examples include:

• When the service was actually started (if different than the "official story").
• Who actually ran a service and their own personal history.
• How the service was structured behind the scenes. (For example, there was no "trading bot".)
• Details of what audits reported and how vulnerabilities were missed during auditing.

What Happened

The specific events of the loss and how it came about. What actually happened to cause the loss and some of the events leading up to it.

Key Event Timeline - Celsius Platform Withdrawals Paused

Date	Event	Description
November 14th, 2019 4:03:00 AM MST	Celsius Promotion	Celsius posts a promotion on Twitter "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".
July 28th, 2020 1:05:00 PM MDT	CoinDesk Article Warning Investors	A CoinDesk article is published warning investors about the extra risks of investing with Celsius. It states that Celsius Network has not shared with depositors all of the risks associated with the unsecured lending it undertakes, according to a CoinDesk article. Despite CEO Alex Mashinsky claiming the company "strictly demands collateral when making a loan," a spokesperson confirmed to CoinDesk that Celsius also issues uncollateralised loans on a limited basis. While this accounts for a small percentage of its loans, it is one of several salient items the company has downplayed or not shared with depositors, the article said. The majority of Celsius’ loans appear to be collateralised but the company has invested in perpetual swaps, futures-like contracts with no expiry date, which increases its vulnerability to sell-offs, according to anonymous sources. TBD follow up on article changes over time.
June 9th, 2022	CoinYar Speculation	A CoinYar article mentioned that Celsius may have been part of the collapse of Terra/Luna by pulling assets from the platform prior to it's collapse. “Celsius said that its risk-management group recognized “shifts in the stability” of the platform that prompted it to remove its assets only for the sake of protecting its customers’ money. The company didn’t profit from the instability, it said.”. TBD More on this article.
July 11th, 2022 4:45:01 PM MDT	CoinMarketBag Announcement	YouTuber Mariah Monetize discusses her experience with Celsius Network and why she will not be depositing new funds to cover her current loan. She explains that she was unable to withdraw her funds in time before the withdrawal restriction was implemented, leaving her with $30,000 on the platform. Additionally, she received an email regarding a $3,000 loan that she was unable to pay back due to a restriction on transferring funds. Celsius Network asked her to add collateral to her existing loan, but she was unable to use her existing Ethereum as collateral due to the withdrawal restriction. Mariah expresses her frustration with the situation and explains that she will not deposit any more funds into Celsius Network. She also mentions that she will be making another video to provide more information about what has been happening with Celsius Network. TBD double check date
June 12th, 2022 8:10:00 PM MDT	Withdrawal Pause Announcement	Celsius announces they are "pausing all withdrawals, Swap, and transfers between accounts" on Twitter. A more detailed announcement is also posted to their blog. TBD populate community reactions.
June 12th, 2022 8:41:00 PM MDT	Twitter Comment	Twitter user ledgerstatus comments "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.".
June 12th, 2022 9:22:00 PM MDT	Reuters Publishes Short Celsius Summary	Reuters publishes a short summary of the situation. Crypto lender Celsius Network Ltd said on Sunday it was pausing all swaps, transfers and withdrawals between accounts, due to extreme market conditions. "We are taking this necessary action... in order to stabilize liquidity and operations while we take steps to preserve and protect assets," the company said in a blog post."Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers."
June 12th, 2022 9:35:39 PM MDT	CoinCu Article	CoinCu publishes an article on the pending default. TBD Read more.
June 13th, 2022 2:28:03 AM MDT	Tether Issues Blog Post	Popular stablecoin Tether posts a blog post indicating that their reserves remain strong despite the situation.
June 13th, 2022 11:55:00 PM MDT	Reuters Publishes Article On Celsius	Reuters publishes a full article, attributing the drop in the price of bitcoin (by as much as 14% on Monday) to Celsius Network freezing withdrawals and transfers citing "extreme" market conditions, in the latest sign of the financial market downturn hitting the cryptosphere. 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. After Celsius's announcement, bitcoin touched an 18-month low of $22,725, before rebounding slightly to around $23,265. Companies exposed to cryptocurrencies have previously warned that declines in token prices could have ripple effects, including by triggering margin calls. TBD further review and
June 14th, 2022	FAQ Article Published	Celsius publishes a FAQ article on their blog, which answers many questions. TBD fill in more details
June 15th, 2022 4:16:00 AM MDT	CoinDesk Article	CoinDesk publishes an article including the Celsius collapse. ”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." TBD More on this article.
June 15th, 2022 10:05:17 AM MDT	Mariah Money Update
June 16th, 2022 11:47:11 AM MDT	Mariah Money Update	YouTube producer Mariah Monetize gives an update on Celsius, after the platform that has paused withdrawals, swaps, and transfers. She states that Celsius has not given any substantial information about the situation and that she is presenting potential possibilities based on Twitter speculations. She believes that there are two possible scenarios for the upcoming Celsius AMA: either Celsius will cancel the AMA, which will negatively impact people's faith in Celsius, or they will not provide any substantial answers to questions. Mariah speculates that Celsius may be facing a targeted attack or that they overleveraged their funds. She goes over some frequently asked questions on Celsius's website and believes that the situation may be a long, drawn-out process that could go through a legal process, which could take years. Finally, Mariah questions whether Celsius should continue to pay out rewards if they cannot pay back people's principal balance.
June 18th, 2022 1:12:37 PM MDT	Coffeezilla Video	Coffeezilla publishes their "Why Celsius Fell Apart" video on YouTube.
June 19th, 2022 5:59:24 PM MDT	Celsius Blog Post	Celsius publishes a blog post stating that its priority remains to stabilize its liquidity and operations after pausing withdrawals, Swap and transfers for a week. The company will continue to work with regulators and officials to find a resolution and has paused Twitter Spaces and AMAs to focus on navigating the challenges it is currently facing.
June 24th, 2022 10:58:00 AM MDT	CoinDesk Case For Suing Celsius	CoinDesk publishes an article on the developing situation, reporting that as defaults, collapses, and liquidity crises hit protocols such as Terra and Celsius, there are likely to be waves of legal action from users and investors who have lost money. However, questions remain as lending protocols have been vague in describing the nature of their services. Marcelo Diaz-Cortes, a securities litigation lawyer, explains that while the jury is still out on whether crypto lenders have a duty of care for customer deposits, a court might examine whether the creators of these cryptocurrencies had extra knowledge that they didn't disclose to the public. He adds that lending platforms like Celsius could be accused of exaggerated claims as it tied itself rhetorically to DeFi, while it is entirely centralized. Diaz-Cortes believes that Celsius and similar platforms may be facing lawsuits as they have avoided clear classification and regulation. TBD more thorough review, anything missed?
June 30th, 2022 10:44:21 AM MDT	Celsius Blog Post	Celsius publishes another blog post. They state the team at Celsius is working diligently to stabilize their liquidity and operations, exploring various options including strategic transactions and restructuring of liabilities. They are working with experts from different disciplines and are committed to maintaining an open dialogue with their community and clients. Celsius provides an FAQ and contact information for those needing assistance.

Total Amount Lost

The total amount lost has been estimated at $11,800,000,000 USD.

How much was lost and how was it calculated? If there are conflicting reports, which are accurate and where does the discrepancy lie?

Immediate Reactions

How did the various parties involved (firm, platform, management, and/or affected individual(s)) deal with the events? Were services shut down? Were announcements made? Were groups formed?

Celsius Tweet and Memo Posted

Celsius posted to Twitter and on their blog to announce that withdrawals were paused, along with swaps and transfers between accounts.

We are writing with a very important message for our community.

Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations.

Acting in the interest of our community is our top priority. In service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow for 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.

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.

Ultimate Outcome

What was the end result? Was any investigation done? Were any individuals prosecuted? Was there a lawsuit? Was any tracing done?

Blog Post After One Week

After a week of withdrawals remaining offline, Celsius posted to their blog to update the community further.

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.

As has been a priority since our company’s inception, we maintain an open dialogue with regulators and officials. We plan to continue working with regulators and officials regarding this pause and our company’s determination to find a resolution.

We are pausing our Twitter Spaces and AMAs to focus on navigating these unprecedented challenges and seeking to fulfill our responsibilities to our community.

Acting in the interest of our community remains our priority and we will continue to work around the clock.

We are grateful for your continued support.

Total Amount Recovered

The total amount recovered is unknown.

What funds were recovered? What funds were reimbursed for those affected users?

Ongoing Developments

What parts of this case are still remaining to be concluded?

General Prevention Policies

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.

Individual Prevention Policies

No specific policies for individual prevention have yet been identified in this case.

For the full list of how to protect your funds as an individual, check our Prevention Policies for Individuals guide.

Platform Prevention Policies

Policies for platforms to take to prevent this situation have not yet been selected in this case.

For the full list of how to protect your funds as a financial service, check our Prevention Policies for Platforms guide.

Regulatory Prevention Policies

No specific regulatory policies have yet been identified in this case.

For the full list of regulatory policies that can prevent loss, check our Prevention Policies for Regulators guide.