Celsius Platform Withdrawals Paused: Difference between revisions

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{{Case Study Under Construction}}[[File:Celsiusnetwork.jpg|thumb|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, the platform closed all customer withdrawals and transfers after June 12th, 2022. Customers are even unable to transfer existing assets to add collateral to loans. Celsius is reportedly looking into different options to restructure the service. It remains to be seen what portion of the $11.8b in customer assets will be retrievable.
{{Imported Case Study 2|source=https://www.quadrigainitiative.com/casestudy/celsiusplatformwithdrawalspaused.php}}
{{Unattributed Sources}}
 
[[File:Celsiusnetwork.jpg|thumb|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.<ref name="youtube-8456" /><ref name="coindesk-8457" /><ref name="coinyar-8089" /><ref name="celsiusnetwork-6119" /><ref name="celsiusnetwork-6130" /><ref name="starttrades-6120" /><ref name="coincunews-8458" /><ref name="ledgerstatustwitter-8459" /><ref name="celsiusnetworktwitter-8460" /><ref name="celsiusnetworktwitter-8461" /><ref name="celsiusnetworkblog-8462" /><ref name="celsiusnetworkblog-8463" /><ref name="celsiusnetworkblog-8464" /><ref name="celsiusnetworkblog-8465" /><ref name="reuters-8466" /><ref name="tether-8467" /><ref name="wikipedia-6128" /><ref name="coinbureau-8468" /><ref name="coindesk-8455" /><ref name="coindesk-8469" /><ref name="coinmarketbag-8470" /><ref name="youtube-8526" /><ref name="coffeebreakyttwitter-8948" /><ref name="reddit-9134" /><ref name="proactiveinvestors-9280" /><ref name="nytimes-9831" /><ref name="gizmodo-10036" /><ref name="newjerseyattorneygeneral-10037" /><ref name="newsdotbitcoin-10038" /><ref name="coinmarketcaptwitter-10164" /><ref name="unnamed-11470" />


== About Celsius Network ==
== About Celsius Network ==
Celsius was founded in 2017 and was registered as a limited liability company in Delaware with offices at 221 River Street, 9th Floor, Hoboken, New Jersey<ref name="newjerseyattorneygeneral-10037" />.
"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 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."


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"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.”"
"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.”"


Homepage: <ref name="celsiusnetwork-6119" /><ref name="celsiusnetwork-6130" />
"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."


Third Party Review: <ref name="starttrades-6120" /><ref name="coinbureau-8468" />
"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."


Wikipedia: <ref name="wikipedia-6128" />
"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:
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.
* Audits performed, and excerpts that may have been included.
* Business registration documents shown (fake or legitimate).
* Business registration documents shown (fake or legitimate).
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== The Reality ==
== The Reality ==
This sections is included if a case involved deception or information that was unknown at the time. Examples include:


=== No Legal Protections for Users ===
"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."
=== New Jersey Cease and Desist Order ===
"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."
=== Warnings By Prominent  Community Members ===
"”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."
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").
* When the service was actually started (if different than the "official story").
* Who actually ran a service and their own personal history.
* Who actually ran a service and their own personal history.
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== What Happened ==
== What Happened ==
Celsius offered an "Earn Rewards" program which allowed customers to set up accounts with fixed interest rates in crypto-assets. These assets were not backed on the platform, and instead would be provided to third parties who invested them in various ways. Customers received limited visibility into how their assets were being invested behind the scenes, and saw only the balance of their original assets plus interest earned. Ultimately on June 12th, 2022, customers found that they could no longer withdraw their funds rather suddenly and the platform started down a bankruptcy route.
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.
{| class="wikitable"
{| class="wikitable"
|+Key Event Timeline - Celsius Platform Withdrawals Paused
|+Key Event Timeline - Celsius Platform Withdrawals Paused
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!Event
!Event
!Description
!Description
|-
|June 2018
|Start of Earn Rewards Platform
|According to the State of New Jersey Bureau of Securities, Celsius first started their "Earn Rewards" accounts in June 2018<ref name="newjerseyattorneygeneral-10037" />.
|-
|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"<ref name="celsiusnetworktwitter-8460" />.
|-
|July 28th, 2020 1:05:00 PM MDT
|CoinDesk Article Warning Investors
|A CoinDesk article is published<ref>[https://web.archive.org/web/20200729003346/https://www.coindesk.com/what-crypto-lender-celsius-isnt-telling-its-depositors What Crypto Lender Celsius Isn’t Telling Its Depositors - CoinDesk Archive July 28th, 2020 6:33:46 PM MDT] (Apr 28, 2023)</ref> 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<ref name="coindesk-8469" />. TBD follow up on article changes over time.
|-
|March 7th, 2021
|Assets Are Lent Out To Institutions
|Celsius founder Alex Mashinsky reportedly states that "[u]sers transfer assets with Celsius, Celsius lends funds to institutions and returns up to 80% of earnings to users."
|-
|June 14th, 2021
|Delaware Company Registration
|Celsius is registered as a limited liability company with offices at 221 River Street, 9th Floor, Hoboken, New Jersey<ref name="newjerseyattorneygeneral-10037" />.
|-
|August 18th, 2021
|Unregistered Securities Totalled
|According to the state of New Jersey Bureau of Securities, Celsius at this time held the equivalent of more than $14b USD<ref name="newjerseyattorneygeneral-10037" />.
|-
|September 17th, 2021
|New Jersey Cease and Desist
|The State of New Jersey Bureau of Securities publishes a Cease and Desist order against Celsius<ref name="newjerseyattorneygeneral-10037" />.
|-
|November 1st, 2021
|New Jersey Cease and Desist
|According to a Cease and Desist order from New Jersey<ref name="newjerseyattorneygeneral-10037" />, Celsius is to stop all activity as of this date.
|-
|May 15th, 2022
|Alex Mashinsky Withdrawing Funds
|According to an article later published by Gizmodo<ref name="gizmodo-10036" />, CEO Alex Mashinsky withdraws a total of 1,792,258.766134 USDC ($1,792,258.77 USD), 426.324440288121 ETH ($902,967.18 USD), and 6.00000017 BTC ($186,166.17 USD), which adds up to a total value of $2,881,392.12 USD.
|-
|May 31st, 2022
|Kristine Mashinsky Wtithdrawal
|Alex Mashinsky's wife Kristine withdraws a reported $2m worth of CEL tokens from the platform<ref name="gizmodo-10036" />.
|-
|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.”<ref name="coinyar-8089" />. TBD More on this article.
|-
|-
|June 12th, 2022 8:10:00 PM MDT
|June 12th, 2022 8:10:00 PM MDT
|Withdrawal Pause Announcement
|Main Event
|Celsius announces they are "pausing all withdrawals, Swap, and transfers between accounts" on Twitter<ref name="celsiusnetworktwitter-8461" />. A more detailed announcement is also posted to their blog<ref name="celsiusnetworkblog-8462" />. TBD populate community reactions.
|Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.
|-
|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."<ref name="ledgerstatustwitter-8459" />.
|-
|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."<ref>[https://web.archive.org/web/20220613034136/https://www.reuters.com/technology/crypto-firm-celsius-pauses-all-transfers-withdrawals-between-accounts-2022-06-13/ Crypto firm Celsius pauses all transfers and withdrawals between accounts - Reuters Archive June 12th, 2022 9:41:36 PM MDT] (Apr 28, 2023)</ref>
|-
|June 12th, 2022 9:35:39 PM MDT
|CoinCu Article
|CoinCu publishes an article on the pending default<ref name="coincunews-8458" /><ref>[https://web.archive.org/web/20220613033539/https://news.coincu.com/97954-celsius-facing-default/ Celsius Facing “Default”? - CoinCu News Archive June 12th, 2022 9:35:39 PM MDT] (Apr 12, 2023)</ref>. TBD Read more.
|-
|June 13th, 2022 1:19:00 AM MDT
|CoinMarketCap Article Published
|CoinMarketCap publishes an article on Celsius suspending all withdrawals<ref name="coinmarketcaptwitter-10164" />.
|-
|June 13th, 2022 2:28:03 AM MDT
|Tether Issues Blog Post
|Popular stablecoin Tether posts a blog post<ref>[https://web.archive.org/web/20220613082803/https://tether.to/en/celsius-feels-impact-of-market-volatility-tether-reserves-hold-strong/ Celsius Feels Impact of Market Volatility, Tether Reserves Hold Strong - Tether Blog Archive June 13th, 2022 2:28:03 AM MDT] (Apr 28, 2023)</ref> indicating that their reserves remain strong despite the situation<ref name="tether-8467" />.
|-
|June 13th, 2022 11:55:00 PM MDT
|Reuters Publishes Article On Celsius
|Reuters publishes a full article<ref>[https://web.archive.org/web/20220614061413/https://www.reuters.com/technology/crypto-firm-celsius-pauses-all-transfers-withdrawals-between-accounts-2022-06-13/ Crypto contagion fears spread after Celsius Network freezes withdrawals - Reuters Archive June 14th, 2022 12:14:13 AM MDT] (Apr 28, 2023)</ref>, 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<ref name="reuters-8466" />. TBD further review and
|-
|June 14th, 2022
|FAQ Article Published
|Celsius publishes a FAQ article on their blog, which answers many questions<ref name="celsiusnetworkblog-8463" />. 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."<ref name="coindesk-8457" /> TBD More on this article.
|-
|June 15th, 2022 10:05:17 AM MDT
|Mariah Money Update
|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<ref name="coinmarketbag-8470" /><ref>[https://www.youtube.com/watch?v=717QSyocrZM Mariah Monetize - Why I'm allowing my Celsius loan to default... - YouTube] (Apr 28, 2023)</ref>.
|-
|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<ref>[https://coinmarketbag.com/celsius-network-update-6-16-22/ Celsius Network update 6/16/22 - Mariah Monetize] (May 5, 2023)</ref><ref>[https://www.youtube.com/watch?v=GawkG49js9Q Mariah Monetize - Celsius Network update 6/16/22 - YouTube] (May 5, 2023)</ref>.
|-
|June 18th, 2022 1:12:37 PM MDT
|Coffeezilla Video
|Coffeezilla publishes their "Why Celsius Fell Apart" video on YouTube<ref name="youtube-8456" />.
|-
|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<ref name="celsiusnetworkblog-8464" />.
|-
|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<ref name="coindesk-8455" />. 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<ref name="celsiusnetworkblog-8465" />.
|-
|July 4th, 2022 8:42:00 AM MDT
|MakerDAO Debt Position Repaid
|According to an article by Proactive Research, Celsius repaid another $50m USD of their debt in the MakerDAO protocol, which totaled $200m USD. This was necessary to avoid a margin call situation on the bitcoin held there<ref name="proactiveinvestors-9280" />. Withdrawals remain frozen on the Celsius website at this time. "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."
|-
|July 12th, 2022 11:09:00 AM MDT
|CoffeeZilla Tweet About Chapter 11
|CoffeeZilla tweets about the type of bankruptcy being pursued<ref name="coffeebreakyttwitter-8948" />. "Voyager is trying to sell people this "chapter 11 bankruptcy-reorg", and hide the fact that under bankruptcy law, a company that describes itself as a "BROKER", cannot do CH11. They should be required to liquidate under SIPA. (Securities Investor Protection Act)."
|-
|July 15th, 2022 4:15:00 PM MDT
|Andrei Jikh Video on Celsius
|Andrei Jikh shares a video including information about the bankruptcy of Celsius, a major player in the cryptocurrency space. Celsius reported assets under management of $12 billion as of May 2021, had 1.7 million customers in June, and raised $750 million in series B funding last year, valuing the company at $3.25 billion. One of the entities that gave them money was Quebec, Canada's second-largest pension fund, which could potentially hurt Canadian retirees. Celsius declared chapter 11 bankruptcy, with over 100,000 creditors owed money. Celsius froze all customer withdrawals last month, stating it was due to extreme market conditions, but it was likely because they lent money to or borrowed money from Three Arrows Capital, who were not conservative with people's money. Celsius took out collateralized term loans from a private lending platform after running out of ways to make money, and the lender was unable to return the company's collateral on time when Celsius tried to repay the loan. Vermont launched a private investigation into Celsius, alleging that they are deeply insolvent, possibly due to their failure to register their interest accounts as securities, and their customers did not receive critical disclosures about their financial condition. "[P]ersonally I stand to lose potentially multiple six figures which is a lot and it hurts it's not fun that still represents roughly 10 percent of my current net worth so yes it's a lot but i'm young and hopefully I can recover"<ref name="youtube-8526" />.
|-
|-
|September 13th, 2022 10:29:28 AM MDT
|
|Celsius Plotting a Comeback
|
|According to the New York Times, Celsius is plotting a comeback<ref name="nytimes-9831" />. "The chief executive of the experimental crypto bank Celsius has told employees about an audacious plan to revive the firm, which filed for bankruptcy in July."
|
|-
|October 2nd, 2022 2:06:44 PM MDT
|Jail He Should Be Reddit
|The Reddit community is outraged by the withdrawal of funds prior to the bankruptcy<ref name="reddit-9134" />.
|-
|October 4th, 2022 12:30:33 PM MDT
|Asset Sale Scheduled
|A report by Bitcoin News shares that the Celsius bankruptcy asset sale is scheduled. There is speculation that the CEO of FTX may bid<ref name="newsdotbitcoin-10038" />.
|-
|October 6th, 2022 4:30:00 AM MDT
|Celsius Executives Cashed Out Funds
|News reports from Gizmodo allege that multiple Celsius executives cashed out funds in anticipation of the collapse. It's reported that between $17m USD and $23m USD worth of funds were cashed out in the days just prior to the collapse of the platform<ref name="gizmodo-10036" />. "The two execs who pulled out the combined $17 million in crypto were former CEO Alex Mashinsky and former Chief Strategy Officer Daniel Leon. Mashinsky resigned as CEO in September, but is still at the center of the investigation over whether Celsius was little more than a Ponzi Scheme—something that over 40 states are currently looking into. Leon resigned just yesterday."
|-
|October 16th, 2022 1:00:08 AM MDT
|CryptoKwam Video Posted
|The incident is featured in a CryptoKwam video on YouTube as an argument for holding your own private keys<ref name="youtube-9289">[https://www.youtube.com/watch?v=lrWsUa1ItKQ CryptoKwam - Vauld, Celsius, and Voyager suspend Withdrawals. Why you should own your Private Keys! Ledger Nano X - YouTube] (Oct 19, 2022)</ref>.
|}
|}


== Technical Details ==
== Technical Details ==
This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?


== Total Amount Lost ==
== Total Amount Lost ==
Line 203: Line 121:
== Immediate Reactions ==
== 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?
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?
"@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 Tweet and Memo Posted ===
Celsius posted to Twitter<ref name="celsiusnetworktwitter-8461" /> and on their blog to announce that withdrawals were paused, along with swaps and transfers between accounts<ref name="celsiusnetworkblog-8462" />.<blockquote>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.</blockquote>


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


== Total Amount Recovered ==
The total amount recovered is unknown.


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


"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."
== 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.


"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."
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 ==
{{Prevention:Individuals:Placeholder}}


"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."
{{Prevention:Individuals:End}}


"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."
== Platform Prevention Policies ==
{{Prevention:Platforms:Placeholder}}


"Celsius has engaged restructuring consultants Alvarez & Marsal on the matter."
{{Prevention:Platforms:End}}


"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."
== Regulatory Prevention Policies ==
{{Prevention:Regulators:Placeholder}}


=== Blog Post After One Week ===
{{Prevention:Regulators:End}}
After a week of withdrawals remaining offline, Celsius posted to their blog to update the community further<ref name="celsiusnetworkblog-8464" />.<blockquote>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.
== References ==
<references><ref name="youtube-8456">[https://www.youtube.com/watch?v=1nVG8PF4ECU Why Celsius Fell Apart - YouTube] (Jun 19, 2022)</ref>


We are pausing our Twitter Spaces and AMAs to focus on navigating these unprecedented challenges and seeking to fulfill our responsibilities to our community.
<ref name="coindesk-8457">[https://www.coindesk.com/business/2022/06/15/celsius-troubles-ust-collapse-could-have-long-term-benefits-for-crypto-fsinsight-says/ Celsius Troubles, UST Collapse May Help Crypto Long Term, FSInsight Says] (Jun 19, 2022)</ref>


Acting in the interest of our community remains our priority and we will continue to work around the clock.
<ref name="coinyar-8089">[https://coinyar.com/news/did-celsius-withdrawal-trigger-the-terra-luna-collapse-claim-response/ Did Celsius’ Withdrawal Trigger The Terra/ LUNA Collapse? Claim & Response - CoinYar] (Jun 19, 2022)</ref>


We are grateful for your continued support.</blockquote>
<ref name="celsiusnetwork-6119">[https://celsius.network/ Celsius Network | Earn Crypto, Borrow Cash and Unbank Yourself] (Jan 30, 2022)</ref>


=== Chapter 11 Bankruptcy And Controversy ===
<ref name="celsiusnetwork-6130">[https://celsius.network/about-us About Us | Unbank Yourself] (Jan 30, 2022)</ref>
CoffeeZilla posts about the Chapter 11 distinction<ref name="coffeebreakyttwitter-8948" />.<blockquote>Voyager is trying to sell people this "chapter 11 bankruptcy-reorg", and hide the fact that under bankruptcy law, a company that describes itself as a "BROKER", cannot do CH11.


They should be required to liquidate under SIPA. (Securities Investor Protection Act).
<ref name="starttrades-6120">[https://web.archive.org/web/20220103001119/https://starttrades.com/blogs/news/is-celsius-network-safe-to-put-your-money Is Celsius Network Safe To Put Your Money (Updated Dec'21 on BadgerDAO)] (Jan 30, 2022)</ref>


SIPA liquidation stands a good chance of being BETTER for investors, since under SIPA, investors have protections and would be the first to get paid...but get this...
<ref name="coincunews-8458">[https://news.coincu.com/97954-celsius-facing-default/ Celsius Facing "Default"? - CoinCu News] (Jul 12, 2022)</ref>


VOYAGERS LAWYERS ARE TRYING TO STOP THIS. THEY SAY IT WOULD "BENEFIT NO ONE".
<ref name="ledgerstatustwitter-8459">[https://twitter.com/ledgerstatus/status/1536176852200525825 @ledgerstatus Twitter] (Jul 12, 2022)</ref>


Instead, the lawyers of Voyager argue their customers NEVER OWNED THEIR OWN CRYPTO--- despite Voyager's own app LITERALLY SAYING "You own" your crypto.
<ref name="celsiusnetworktwitter-8460">[https://twitter.com/CelsiusNetwork/status/1194933803212562437 @CelsiusNetwork Twitter] (Jul 12, 2022)</ref>


This is self-serving masquerading as "helping investors"
<ref name="celsiusnetworktwitter-8461">[https://twitter.com/CelsiusNetwork/status/1536169010877739009 @CelsiusNetwork Twitter] (Jul 12, 2022)</ref>


All of this hinges on whether Voyager was selling people 'securities' or not when they sold crypto. Voyager is arguing they weren't, therefore have no protections offered to regular investors.</blockquote>
<ref name="celsiusnetworkblog-8462">[https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6 https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6] (Jul 12, 2022)</ref>


== Total Amount Recovered ==
<ref name="celsiusnetworkblog-8463">[https://blog.celsius.network/community-faq-510f9996d94c https://blog.celsius.network/community-faq-510f9996d94c] (Jul 12, 2022)</ref>
The total amount recovered is presently unknown.


== Ongoing Developments ==
<ref name="celsiusnetworkblog-8464">[https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998 https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998] (Jul 12, 2022)</ref>
What parts of this case are still remaining to be concluded?


"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."
<ref name="celsiusnetworkblog-8465">[https://blog.celsius.network/across-celsius-today-c71b29513a9b https://blog.celsius.network/across-celsius-today-c71b29513a9b] (Jul 12, 2022)</ref>


"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."
<ref name="reuters-8466">[https://www.reuters.com/technology/crypto-firm-celsius-pauses-all-transfers-withdrawals-between-accounts-2022-06-13/ Crypto contagion fears spread after Celsius Network freezes withdrawals | Reuters] (Jul 12, 2022)</ref>


"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."
<ref name="tether-8467">[https://tether.to/en/celsius-feels-impact-of-market-volatility-tether-reserves-hold-strong/ https://tether.to/en/celsius-feels-impact-of-market-volatility-tether-reserves-hold-strong/] (Jul 12, 2022)</ref>


"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."
<ref name="wikipedia-6128">[https://en.wikipedia.org/wiki/Celsius_Network Celsius Network - Wikipedia] (Jan 30, 2022)</ref>
== Individual Prevention Policies ==
The Celsius platform did not have a proper backing of customer funds. There was no visibility into the fund backing outside of the company itself, and it certainly falls short of multiple rotating validators.


{{Prevention:Individual:Avoid Third Party Custodians}}
<ref name="coinbureau-8468">[https://www.coinbureau.com/review/celsius-network-cel/ Celsius Network Review: Safe Platform? This You NEED To Know!!] (Jul 12, 2022)</ref>


{{Prevention:Individual:Store Funds Offline}}
<ref name="coindesk-8455">[https://www.coindesk.com/layer2/2022/06/24/the-case-for-suing-celsius-terraform-labs/ The Case for Suing Celsius, Terraform Labs] (Jul 12, 2022)</ref>


{{Prevention:Individual:Question Unrealistic Profit}}
<ref name="coindesk-8469">[https://www.coindesk.com/business/2020/07/28/what-crypto-lender-celsius-isnt-telling-its-depositors/ What Crypto Lender Celsius Isn’t Telling Its Depositors] (Jul 12, 2022)</ref>


{{Prevention:Individuals:End}}
<ref name="coinmarketbag-8470">[https://coinmarketbag.com/why-im-allowing-my-celsius-loan-to-default/ Why I'm allowing my Celsius loan to default... | CoinMarketBag] (Jul 12, 2022)</ref>


== Platform Prevention Policies ==
<ref name="youtube-8526">[https://www.youtube.com/watch?v=K12FFiiTDnY The Crypto Collapse Just Got Worse - YouTube] (Jul 16, 2022)</ref>
{{Prevention:Platforms:No Secret High Risk Investments}}


{{Prevention:Platforms:Regular Audit Procedures}}
<ref name="coffeebreakyttwitter-8948">[https://twitter.com/coffeebreak_YT/status/1546904563160055809 @coffeebreak_YT Twitter] (Aug 31, 2022)</ref>


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.
<ref name="reddit-9134">[https://www.reddit.com/r/Bitcoin/comments/xtyell/jail_he_should_be/ Jail he should be. : Bitcoin] (Oct 3, 2022)</ref>


{{Prevention:Platforms:Implement Multi-Signature}}
<ref name="proactiveinvestors-9280">[https://www.proactiveinvestors.ca/companies/news/986546/celsius-user-funds-remain-in-the-balance-as-partial-debt-repaid-986546.html https://www.proactiveinvestors.ca/companies/news/986546/celsius-user-funds-remain-in-the-balance-as-partial-debt-repaid-986546.html] (Oct 19, 2022)</ref>


{{Prevention:Platforms:End}}
<ref name="nytimes-9831">[https://www.nytimes.com/2022/09/13/technology/celsius-network-crypto.html Celsius Network Plots a Comeback After a Crypto Crash - The New York Times] (Nov 30, 2022)</ref>


== Regulatory Prevention Policies ==
<ref name="gizmodo-10036">[https://gizmodo.com/celsius-execs-cashed-out-bitcoin-price-crypto-ponzi-1849623526 Celsius Execs Cashed out $17 Million Before Halting Withdrawals] (Dec 15, 2022)</ref>
{{Prevention:Regulators:Cryptocurrency Education Mandate}}


{{Prevention:Regulators:Platform Security Assessments}}
<ref name="newjerseyattorneygeneral-10037">[https://www.nj.gov/oag/newsreleases21/Celsius-Order-9.17.21.pdf https://www.nj.gov/oag/newsreleases21/Celsius-Order-9.17.21.pdf] (Dec 15, 2022)</ref>


{{Prevention:Regulators:Establish Industry Insurance Fund}}
<ref name="newsdotbitcoin-10038">[https://news.bitcoin.com/bankrupt-crypto-lender-celsius-asset-sale-is-scheduled-sources-say-ftx-ceo-may-bid/ Bankrupt Crypto Lender Celsius' Asset Sale Is Scheduled, Sources Say FTX CEO May Bid – Bitcoin News] (Dec 15, 2022)</ref>


{{Prevention:Regulators:End}}
<ref name="coinmarketcaptwitter-10164">[https://twitter.com/CoinMarketCap/status/1536246819436601344 @CoinMarketCap Twitter] (Jan 6, 2023)</ref>


== References ==
<ref name="unnamed-11470">[https://web.archive.org/web/20220616105809/https://old.reddit.com/r/CryptoCurrency/comments/vdj9mn/no_regulation_doesnt_justify_a_scam/ No regulation doesn't justify a scam : CryptoCurrency] (Aug 18, 2023)</ref></references>
<references>
<ref name="youtube-8456">[https://www.youtube.com/watch?v=1nVG8PF4ECU Why Celsius Fell Apart - YouTube] (Jun 19, 2022)</ref>
<ref name="coindesk-8457">[https://www.coindesk.com/business/2022/06/15/celsius-troubles-ust-collapse-could-have-long-term-benefits-for-crypto-fsinsight-says/ Celsius Troubles, UST Collapse May Help Crypto Long Term, FSInsight Says - CoinDesk] (Jun 19, 2022)</ref>
<ref name="coinyar-8089">[https://coinyar.com/news/did-celsius-withdrawal-trigger-the-terra-luna-collapse-claim-response/ Did Celsius’ Withdrawal Trigger The Terra/ LUNA Collapse? Claim & Response - CoinYar] (Jun 19, 2022)</ref>
<ref name="celsiusnetwork-6119">[https://celsius.network/ Celsius Network | Earn Crypto, Borrow Cash and Unbank Yourself] (Jan 30, 2022)</ref>
<ref name="celsiusnetwork-6130">[https://celsius.network/about-us About Us | Unbank Yourself] (Jan 30, 2022)</ref>
<ref name="starttrades-6120">[https://web.archive.org/web/20220103001119/https://starttrades.com/blogs/news/is-celsius-network-safe-to-put-your-money Is Celsius Network Safe To Put Your Money (Updated Dec'21 on BadgerDAO)] (Jan 30, 2022)</ref>
<ref name="coincunews-8458">[https://news.coincu.com/97954-celsius-facing-default/ Celsius Facing "Default"? - CoinCu News] (Jul 12, 2022)</ref>
<ref name="ledgerstatustwitter-8459">[https://twitter.com/ledgerstatus/status/1536176852200525825 ledgerstatus - "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." - Twitter] (Jul 12, 2022)</ref>
<ref name="celsiusnetworktwitter-8460">[https://twitter.com/CelsiusNetwork/status/1194933803212562437 CelsiusNetwork - "If you don't have free and unlimited access to your own funds, are they really *your* funds?" - Twitter] (Jul 12, 2022)</ref>
<ref name="celsiusnetworktwitter-8461">[https://twitter.com/CelsiusNetwork/status/1536169010877739009 CelsiusNetwork - "CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority." - Twitter] (Jul 12, 2022)</ref>
<ref name="celsiusnetworkblog-8462">[https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6 A Memo to the Celsius Community - Celsius Network Blog] (Jul 12, 2022)</ref>
<ref name="celsiusnetworkblog-8463">[https://blog.celsius.network/community-faq-510f9996d94c Community FAQ - Celsius Blog] (Jul 12, 2022)</ref>
<ref name="celsiusnetworkblog-8464">[https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998 A note to the Celsius community - Celsius Blog] (Jul 12, 2022)</ref>
<ref name="celsiusnetworkblog-8465">[https://blog.celsius.network/across-celsius-today-c71b29513a9b Across Celsius today - Celsius Blog] (Jul 12, 2022)</ref>
<ref name="reuters-8466">[https://www.reuters.com/technology/crypto-firm-celsius-pauses-all-transfers-withdrawals-between-accounts-2022-06-13/ Crypto contagion fears spread after Celsius Network freezes withdrawals - Reuters] (Jul 12, 2022)</ref>
<ref name="tether-8467">[https://tether.to/en/celsius-feels-impact-of-market-volatility-tether-reserves-hold-strong/ Celsius Feels Impact of Market Volatility, Tether Reserves Hold Strong - Tether Blog] (Jul 12, 2022)</ref>
<ref name="wikipedia-6128">[https://en.wikipedia.org/wiki/Celsius_Network Celsius Network - Wikipedia] (Jan 30, 2022)</ref>
<ref name="coinbureau-8468">[https://www.coinbureau.com/review/celsius-network-cel/ Celsius Network Review: Safe Platform? This You NEED To Know!!] (Jul 12, 2022)</ref>
<ref name="coindesk-8455">[https://www.coindesk.com/layer2/2022/06/24/the-case-for-suing-celsius-terraform-labs/ The Case for Suing Celsius, Terraform Labs - CoinDesk] (Jul 12, 2022)</ref>
<ref name="coindesk-8469">[https://www.coindesk.com/business/2020/07/28/what-crypto-lender-celsius-isnt-telling-its-depositors/ What Crypto Lender Celsius Isn’t Telling Its Depositors - CoinDesk] (Jul 12, 2022)</ref>
<ref name="coinmarketbag-8470">[https://coinmarketbag.com/why-im-allowing-my-celsius-loan-to-default/ Why I'm allowing my Celsius loan to default... - CoinMarketBag] (Jul 12, 2022)</ref>
<ref name="youtube-8526">[https://www.youtube.com/watch?v=K12FFiiTDnY Andrei Jikh - The Crypto Collapse Just Got Worse - YouTube] (Jul 16, 2022)</ref>
<ref name="coffeebreakyttwitter-8948">[https://twitter.com/coffeebreak_YT/status/1546904563160055809 CoffeeZilla - "Voyager is trying to sell people this "chapter 11 bankruptcy-reorg", and hide the fact that under bankruptcy law, a company that describes itself as a "BROKER", cannot do CH11." - Twitter] (Aug 31, 2022)</ref>
<ref name="reddit-9134">[https://web.archive.org/web/20221003050401/https://old.reddit.com/r/Bitcoin/comments/xtyell/jail_he_should_be/ Jail he should be. - Reddit Archive October 2nd, 2022 11:04:01 PM MDT] (Oct 3, 2022)</ref>
<ref name="proactiveinvestors-9280">[https://www.proactiveinvestors.ca/companies/news/986546/celsius-user-funds-remain-in-the-balance-as-partial-debt-repaid-986546.html Celsius’ user funds remain in the balance as partial debt repaid - Proactive Research] (Oct 19, 2022)</ref>
<ref name="nytimes-9831">[https://www.nytimes.com/2022/09/13/technology/celsius-network-crypto.html Celsius Network Plots a Comeback After a Crypto Crash - The New York Times] (Nov 30, 2022)</ref>
<ref name="gizmodo-10036">[https://gizmodo.com/celsius-execs-cashed-out-bitcoin-price-crypto-ponzi-1849623526 Celsius Execs Cashed out $17 Million Before Halting Withdrawals - Gizmodo] (Dec 15, 2022)</ref>
<ref name="newjerseyattorneygeneral-10037">[https://www.nj.gov/oag/newsreleases21/Celsius-Order-9.17.21.pdf Celsius Cease and Desist Order - State of New Jersey Bureau of Securities] (Dec 15, 2022)</ref>
<ref name="newsdotbitcoin-10038">[https://news.bitcoin.com/bankrupt-crypto-lender-celsius-asset-sale-is-scheduled-sources-say-ftx-ceo-may-bid/ Bankrupt Crypto Lender Celsius' Asset Sale Is Scheduled, Sources Say FTX CEO May Bid – Bitcoin News] (Dec 15, 2022)</ref>
<ref name="coinmarketcaptwitter-10164">[https://twitter.com/CoinMarketCap/status/1536246819436601344 CoinMarketCap - "Celsius has suspended ALL withdrawals, swaps and transfers — blaming 'extreme market conditions'" - Twitter] (Jan 6, 2023)</ref>
</references>

Revision as of 23:11, 3 September 2023

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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.[1][2][3][4][5][6][7][8][9][10][11][12][13][14][15][16][17][18][19][20][21][22][23][24][25][26][27][28][29][30][31]

About Celsius Network

"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
June 12th, 2022 8:10:00 PM MDT Main Event Expand this into a brief description of what happened and the impact. If multiple lines are necessary, add them here.

Technical Details

This section includes specific detailed technical analysis of any security breaches which happened. What specific software vulnerabilities contributed to the problem and how were they exploited?

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?

Ultimate Outcome

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

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.

References

  1. ↑ Why Celsius Fell Apart - YouTube (Jun 19, 2022)
  2. ↑ Celsius Troubles, UST Collapse May Help Crypto Long Term, FSInsight Says (Jun 19, 2022)
  3. ↑ Did Celsius’ Withdrawal Trigger The Terra/ LUNA Collapse? Claim & Response - CoinYar (Jun 19, 2022)
  4. ↑ Celsius Network | Earn Crypto, Borrow Cash and Unbank Yourself (Jan 30, 2022)
  5. ↑ About Us | Unbank Yourself (Jan 30, 2022)
  6. ↑ Is Celsius Network Safe To Put Your Money (Updated Dec'21 on BadgerDAO) (Jan 30, 2022)
  7. ↑ Celsius Facing "Default"? - CoinCu News (Jul 12, 2022)
  8. ↑ @ledgerstatus Twitter (Jul 12, 2022)
  9. ↑ @CelsiusNetwork Twitter (Jul 12, 2022)
  10. ↑ @CelsiusNetwork Twitter (Jul 12, 2022)
  11. ↑ https://blog.celsius.network/a-memo-to-the-celsius-community-59532a06ecc6 (Jul 12, 2022)
  12. ↑ https://blog.celsius.network/community-faq-510f9996d94c (Jul 12, 2022)
  13. ↑ https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998 (Jul 12, 2022)
  14. ↑ https://blog.celsius.network/across-celsius-today-c71b29513a9b (Jul 12, 2022)
  15. ↑ Crypto contagion fears spread after Celsius Network freezes withdrawals | Reuters (Jul 12, 2022)
  16. ↑ https://tether.to/en/celsius-feels-impact-of-market-volatility-tether-reserves-hold-strong/ (Jul 12, 2022)
  17. ↑ Celsius Network - Wikipedia (Jan 30, 2022)
  18. ↑ Celsius Network Review: Safe Platform? This You NEED To Know!! (Jul 12, 2022)
  19. ↑ The Case for Suing Celsius, Terraform Labs (Jul 12, 2022)
  20. ↑ What Crypto Lender Celsius Isn’t Telling Its Depositors (Jul 12, 2022)
  21. ↑ Why I'm allowing my Celsius loan to default... | CoinMarketBag (Jul 12, 2022)
  22. ↑ The Crypto Collapse Just Got Worse - YouTube (Jul 16, 2022)
  23. ↑ @coffeebreak_YT Twitter (Aug 31, 2022)
  24. ↑ Jail he should be. : Bitcoin (Oct 3, 2022)
  25. ↑ https://www.proactiveinvestors.ca/companies/news/986546/celsius-user-funds-remain-in-the-balance-as-partial-debt-repaid-986546.html (Oct 19, 2022)
  26. ↑ Celsius Network Plots a Comeback After a Crypto Crash - The New York Times (Nov 30, 2022)
  27. ↑ Celsius Execs Cashed out $17 Million Before Halting Withdrawals (Dec 15, 2022)
  28. ↑ https://www.nj.gov/oag/newsreleases21/Celsius-Order-9.17.21.pdf (Dec 15, 2022)
  29. ↑ Bankrupt Crypto Lender Celsius' Asset Sale Is Scheduled, Sources Say FTX CEO May Bid – Bitcoin News (Dec 15, 2022)
  30. ↑ @CoinMarketCap Twitter (Jan 6, 2023)
  31. ↑ No regulation doesn't justify a scam : CryptoCurrency (Aug 18, 2023)
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