Celcius Cause Of Bankruptcy Regarding The Former Employee. A former employee of a bankrupt crypto company, Celsius revealed the company’s various problems before it finally went bankrupt.
Celsius’ former director of financial crimes compliance, Timothy Cradle, revealed a series of corporate missteps that led to the recent bankruptcy turmoil. Several employees also described Celsius’ risk taking, disorganization, and alleged market manipulation.
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“The biggest problem is the failure of risk management. I think Celsius has a great idea, they provide services that people really need, but they don’t manage risk well,” Cradle said.
Cradle said he was part of a three-person compliance team between 2019 and 2021. The role required him to apply international finance laws to Celsius’s businesses. But resources are limited, he said.
“The compliance team is too small. Compliance is a cost center, we basically suck money and don’t return it. They don’t want to spend money on compliance,” Cradle said.
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One of the company’s internal documents obtained by CNBC echoes claims that the cryptocurrency platform is bogus and there is not sufficient compliance staff for the number of users on the Celsius platform as there are only 3 full-time individuals.
Cradle said he was very concerned about conversations at Celsius’s Christmas party in 2019 about the cryptocurrency that Celsius created and used, the so-called “CEL Coin” token. The executive said pumping cel tokens and actively trading and increasing token prices.
“They’re not ashamed about it. They are actually trading tokens to manipulate prices. It comes up in two completely different conversations for two completely different reasons,” Cradle said.
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Cradle and other employees receive part of their salary in tokens. This allows them to share in the company’s financial profits, similar to the equity appeal in fast-growing startups.
Behind the scenes, Celsius would lend the money to hedge funds and others willing to pay higher yields. It will also invest in other high-risk cryptocurrency projects, according to internal documents.
Celcius Cause Of Bankruptcy Regarding The Former Employee. Celsius will share the profits with customers. That model crumbled along with the plunging cryptocurrency prices. That led to many companies freezing assets and at least three filing for bankruptcy.
Previously, Celsius’ bankruptcy filing this week came as hardly a surprise to anyone. Because based on the pattern, after freezing customer assets, usually everything ends in bankruptcy. Even so, before going bankrupt Celsius managed to attract around 1.7 million new users.
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Three weeks after Celsius suspended all recalls due to extreme market conditions and days before going bankrupt, Celsius is still advertising in large bold text on its website. In its ads, Celsius still promises an annual return of nearly 19 percent.
Promises like these help attract new users quickly. Celsius said it had 1.7 million subscribers, as of June.
“Transfer your crypto to Celsius and you can earn up to 18.63 percent APY in a matter of minutes,” reads an advertisement on the Celsius website before it went bankrupt, quoted from CNBC, Monday (18/7/2022).
The Celsius crash marked the third major bankruptcy in the crypto ecosystem in two weeks, and it is billed as the Lehman Brothers crypto moment.
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The contagion effect of failed crypto lenders, similar to the collapse of the major Wall Street banks that ultimately predicted the 2008 mortgage debt and financial crisis.
Celsius Has 100,000 Creditors
The company’s bankruptcy filings show Celsius also has more than 100,000 creditors, some of whom lent the platform cash without any collateral to back the arrangement.
Its list of its top 50 unsecured lenders includes trading firm Sam Bankman-Fried, Alameda Research, as well as an investment firm based in the Cayman Islands.
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Company Assets Down and Debt
In October 2021, Celsius CEO Alex Mashinsky said the crypto lender had $25 billion in assets under management.
Even as recently as May despite falling cryptocurrency prices, Celsius still manages around $11.8 billion in assets, according to its website. The company also has another USD 8 billion in client loans, making it one of the biggest names in the world in crypto lending.
Celcius Cause Of Bankruptcy Regarding The Former Employee. Now, Celsius is down to $167 million “in cash,” which it says will provide “sufficient liquidity” to support operations during the restructuring process.
Meanwhile, Celsius owes its users an estimated $4.7 billion, according to its bankruptcy filing and there’s an estimated $1.2 billion hole in its balance sheet.
