In a recent interview with CNBC on December 03, 2022, A former director at Celsius told that the company’s failure to match its assets and liabilities contributed to the hole in its balance sheet.
The crypto lending platform paused its withdrawals in June and later announced its bankruptcy, causing borrowers who have been unable to get their collateral off the platform.
Alan Knitowski, who worked in Technology and Finance for more than 25-years and is CEO of a mobile software firm that trades on the Nasdaq, said in an interview that “Every aspect of what they did was wrong. If my CFO or I actually did anything that looked like this, we would immediately be charged.”
He borrowed $375,000 from Celsius by posting $1.5 Million worth of Bitcoin as collateral. And he did not want to sell those Bitcoins as he liked it as an investment and believed its price would go up.
According to the Celsius model the crypto investors could essentially store their holdings with the firm in exchange for a loan in dollars that they could put to use.
Notably, Mr. Knitowski would get the bitcoin back when he repaid the loan. But it did not seem to happen, as Celsius spiraled into bankruptcy in July after a dive in crypto prices that caused an industry wide liquidity crisis. It must be noted that the firm earlier in the year managed $12 Billion in assets.
Along with Mr. Knitowski, thousands of other loan holders had over $812 Million in collateral locked on Celsius. Additionally, the bankruptcy records show Celsius failed to return collateral to borrowers even after repaying their loans.
Mr. Knitowski said in the interview that he had elected to take out his loans at a 25% loan-to-value rate which means if he took out a $25,000 loan, he would post four times that amount in collateral, or $100,000.
However the recent update from Celsius Network gave some sort of hope to creditors who are working via the bankruptcy process to try and reclaim at least a portion of their funds.
Celsius Network Update
On December 02, 2022 Celsius announced that GalaxyHQ, a financial services and investment management innovator, confirmed their intention to acquire substantially all of the assets, liabilities, and contracts of GK8.
The following announcement follows a robust marketing and sale process. When approved by the Court and upon closing of the sale, proceeds of the sale will inure to the Celsius estate, for the benefit of all stakeholders.
David Adler, a Bankruptcy Lawyer at McCarter & English who is representing Celsius creditors, said “The big question is — who is entitled to the money they get from GK8?” Mr. Adler said he’s representing a group of 75 borrowers who have around $100 Million in digital assets on Celsius’ platform.
Andrew is a blockchain developer who developed his interest in cryptocurrencies while his post-graduation. He is a keen observer of details and shares his passion for writing along with being a developer. His backend knowledge about blockchain helps him give a unique perspective to his writing
Source: https://www.thecoinrepublic.com/2022/12/04/celsius-clients-now-moving-for-further-bankruptcy-process/