Celsius Took Customers’ Money To Invest And Lost $350M

A newly released report claims that the lending platform has suffered a heavy loss of customer money during the investment process.

Celsius “lost” $ 350 million from DeFi investment activities

The company deposited $530 million in BTC and ETH to a DeFi investment unit for income generation in late 2020 and early 2021, representing 10% of total company assets. During the investment process, this unit returned a profit of 1.1 billion USD.

However, if you choose to hold BTC and ETH instead of investing, Celsius will have nearly 1.49 billion USD thanks to the appreciation of the world’s two largest cryptocurrencies in the first and second quarters of 2021. This means that Celsius has lost $350 million in opportunity costs, which are all users’ money.

The above investment unit was discovered to be KeyFi. KeyFi CEO Jason Stone announced on July 8 that he had sued Celsius because of a conflict between the two and was also accused of being a “ponzi”. The information pointed out by Arkham is also consistent with Mr. Stone’s statements about the operation of the 0xb1 fund, the Celsius wallet address.

To earn user interest, Celsius used customer deposits to join DeFi strategies. The company primarily collateralizes customer crypto to borrow stablecoins on protocols like Aave, Compound, and Maker for DeFi investments.

When the crypto market crashed in May-June 2022, the company frantically spent more money to keep these borrowing positions from liquidating.

By July 7, Celsius had repaid the entire $224 million stablecoin loan on Maker, withdrew all $510 million of its mortgage, and transferred it to the FTX exchange.

At the time of writing, Celsius is still maintaining a loan order of USD 85 million DAI on Compound, mortgaged with USD 312 million WBTC and UNI, and a loan order of USD 150 million USDC on Aave, collateral with USD 606 million of assets crypto.

“Pump price” CEL to pay interest to users

Arkham Intelligence also alleges Celsius spent up to $350 million in early and late 2021 to buy CEL tokens on the market and pay interest to investors, even though the company’s own fund still has billions of CEL dollars.

CEL is one of the high interest paying options for users who deposit on Celsius. However, instead of using the company’s funds to pay interest, Celsius spent $350 million to buy CEL on the market, with the purpose of both paying interest and blowing up the token price without worrying about having more CELs on the market.

Spending money to buy CEL is also one of the reasons why the company is in trouble as it is now.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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