- "Crypto Lender Celsius Files for Bankruptcy After Cash Crunch", Bloomberg
- "Troubled Crypto Lender Celsius Hires New Restructuring Lawyers", The Wall Street Journal
The legal complaint reads, "Prior to Plaintiff coming on board, Defendants had no unified, organized, or overarching investment strategy other than lending out the consumer deposits they received. Instead, they were desperately seeking a potential investment that could earn them more than they owed to their depositors. Otherwise, they would have to use additional deposits to pay the interest owed on prior deposits, a classic 'Ponzi scheme.' The recent revelation that Celsius does not have the assets on hand to meet its withdrawal obligations shows that Defendants were, in fact, operating a Ponzi-scheme."
Bancor wrote in their announcement that "Withdrawals performed during this unstable period will not be eligible for IL protection. Users who remain in the protocol will continue earning yields and be entitled to withdraw their fully-protected value when IL protection is reactivated." Many view this as Bancor holding their crypto hostage, because they would take a major loss if they withdrew while IL protection was paused.
The post goes on to say that "two large centralized entities" (likely Celsius and Three Arrows Capital) have rapidly liquidated their $BNT positions and withdrawn a large amount of liquidity; Bancor also wrote that another entity has opened a large short against $BNT.
- "Market Conditions Update — June 19, 2022", Bancor blog
The same MakerDAO team member wrote in the forum that "Contagion risks in DeFi are increasing", and that the project wanted to "cut exposure" to projects that were in trouble. "We could be dealing with Lehman's moment in crypto," he wrote.
Crypto researcher Small Cap Scientist suggested on June 9 that the sell-offs may have been triggered by a "canary in the coal mine": a 50,000 stETH (nominally worth $45.8 million) sell-off by Alameda Research, a trading firm founded by Sam Bankman-Fried. SCS also reported that Celsius Network was "quickly running out of liquid funds to pay back their investors", and "they are taking massive loans" against "billions in illiquid positions" to pay back customers.
There has been a lot of concern lately about Celsius' reserves and its ability to honor redemptions, with some speculating that the platform might be underwater and forced to default. Celsius released a blog post on June 7 titled, "Damn the Torpedoes, Full Speed Ahead" where they accused "vocal actors" of "spreading misinformation and confusion", and promised that "Celsius continues to process withdrawals without delay", and that "Celsius has the reserves (and more than enough ETH) to meet obligations".
Celsius' June 12 announcement did not include any details on what their plans would be, just that they hoped it would allow them to "stabilize liquidity and operations while we take steps to preserve and protect assets".
On June 14, the Wall Street Journal reported that Celsius had hired restructuring attorneys.
Individual accreditation is based on net worth or income: only those with net worth above $1 million, or yearly income above $200,000, qualify. American Celsius users were largely unhappy with the change, with one writing, "Celsius Network making the rich richer. Shameful."