After one week of pausing user withdrawals, swaps and transfers, the firm said it was maintaining an open dialogue with regulators and officials and p
After one week of pausing user withdrawals, swaps and transfers, the firm said it was maintaining an open dialogue with regulators and officials and plans to continue working with them regarding this pause. Celsius has yet to comment on when the company is going to stabilize its operations. Celsius has also paused communications on Twitter Spaces and ask-me-anything (AMA) sessions “to focus on navigating these unprecedented challenges.”
Although Celsius has refrained from communication, media and social media have been buzzing with news and speculation going on around the past, present and future of the company. One of the most interesting developments is a community-led Gamestop-style short squeeze.
The dust from the Terra debacle hasn’t yet settled and but another crisis is shaking up crypto markets. The multi-billion-dollar crypto lending and staking platform Celsius is the latest crypto company to be beset by controversy.
Earlier anomalies
Celsius’ tagline is, “An economy where financial freedom doesn’t come with a price tag.” This marketing tagline, although unbelievable for some, was truly effective for some time. Since opening its doors in 2017, the company had roped in over $25 billion in crypto over five years until things came to a head on June 12, 2022, when the company paused user withdrawals.
However, signs of Celsius’ mismanagement of funds were visible prior to this instance. In December 2020, during the $120 million BadgerDAO hack, Celsius reportedly lost over $50 million worth of crypto, making them the largest single victim of the act. To recompense victims for their losses, BadgerDAO enforced a restitution plan by creating the remBADGER token.
Token holders were assured a payout in remBADGER over the next two years that would cover the remainder of the loss. This assurance came with only one requirement: The remBADGER must remain within the Badger vault. If the token were to be withdrawn, all future repayments would be forfeit. However, on March 18, 2022, Celsius withdrew all of its allotted remBADGER, worth roughly $2.1 million at the time of the transaction.
When Celsius Network realized its mistake, it tried to convince the Badger team to allow it to re-deposit in violation of the rules set forward by the BIP-80 resolution. Unfortunately, for Celsius, the BadgerDAO took the code is law ethos earnestly, and the proposition was voted down.
Many users have also been concerned about the firm’s leadership. Celsius chief financial officer Yaron Shalem and chief revenue officer Roni Cohen-Pavon were both arrested for money laundering in November 2021
On May 11, 2022, when the Terra debacle was just starting to unfold, some began to look at Celsius. Cointelegraph then reported that the Celsius Network had started to deny rumors of significant losses to the company. Celsius chief financial officer Rod Bolger had said, “Our front office teams […] think and act as risk managers to ensure that we are not exposed in any significant way to market swings.”
All funds are safe. We continue to be open for business as usual
As part of our responsibility to serve our community, @CelsiusNetwork implemented and abides by robust risk management frameworks to ensure the safety and security of assets on our platform.
— Alex Mashinsky (@Mashinsky) May 11, 2022
Investors had accused the Celsius team of sitting on its hands while token price tumbled as a result of the Terra fiasco. On May 20, 2022, Celsius (CEL) had fallen from its all-time high of $8.05 to $0.82, which is a 90% drop. Some Celsius users claimed that the platform liquidated their holdings as CEL dropped. They suggested that trading was illiquid as the price fell, worsening their losses. When Cointelegraph contacted the CEO of Celsius, Mashinsky attributed this to the “Shark of Wall Street,” stating:
“They took down LUNA. They tried Tether, Maker and many other companies. It’s not just us. I don’t think they have specific hate or focus on Celsius. They are all looking for any weakness to short and destroy. The point is that the Sharks of Wall Street are now swimming in crypto waters.”
The problem with high-yield APY projects
Celsius was one of the fastest-growing institutions in the crypto market. Up until the collapse, Celsius had 800 people working for them, with the employee count increased by over 200% in just the last year. The problem is that crypto is in a bear market now and to keep on functioning normally, companies need to continue having liquidity. Now, when most retail investors and institutions are pulling their crypto out, liquidity becomes a major concern for them.
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One of the biggest reasons for the collapse of Terra was also illiquid assets. However, most projects, when asked about how their individual projects, claim to be on a different business model than the project that is in trouble at that instance. Cointelegraph had reached…
cointelegraph.com