Where will Celsius get the money to pay its debts?
Celsius’ repayment campaign is still on as the troubled cryptocurrency lending platform just paid off $78 million in USDC to Aave in fourth transactions on Monday.
In addition to repayment, the network also reclaimed all wrapped bitcoin collateral from Aave. The number of wBTC is 6,083, worth nearly $124 million at the press time.
Previously, Celsius paid nearly $35 million of its debt to the Compound platform under DAI stablecoin and withdrew 4436 wBTC from Compound.
It is estimated that only a tiny amount of wBTC was kept in Compound. Total debt has now dropped to $140 million, with $90 million in USDC to Aave and $50 million in DAI to Compound.
Dreary Times for New Finance
The major crypto lender was in the spotlight last week after “successfully” paying off $220 million Maker debt. Celsius then placed more than $500 million worth of wBTC on FTX.
Following that event, Celsius continued to pay off loans on Aave and Compound’s DeFi platforms. The crypto network had paid $60 million in USDC in 3 transactions before adding $18 million to Aave loan repayment in the fourth transaction.
Like the previous Maker’s case, the company then transferred a total of 6000 wBTC worth $124 million to FTX.
In just one week, Celsius has paid off over $310 million to Maker, Aave, and Compound, not to mention other token liquidations. The total debt of the network was also reduced astronomically from $216 million to $140 million, according to on-chain data from Zapper.fi.
The remaining debt that Celsius owes is $90 million in USDC to Aave, $50 million in DAI to Compound, and $80,000 in REN. Additionally, the firm also has a 3 million USD USDC loan from Notional Finance, which is set on September 25.
A Brave Move
Despite the outstanding risk of bankruptcy, Celsius Network is attempting to repay debts and limit the risk of asset liquidation.
As part of the strategy, the cryptocurrency lending platform is said to have hired attorneys from Kirkland & Ellis LLP to advise on the company’s restructuring options. This is also the firm that worked with Voyager Digital for bankruptcy filing support last week.
Wall Street Journal reported on July 10 that Celsius was propelled to hire an attorney to help on the company’s next moves, including filing for bankruptcy on behalf of the law firm Akin Gump Strauss Hauer & Feld LLP previously hired.
Kirkland & Ellis LLP is a long-established international law firm serving clients in private equity, M&A, and other corporate transactions.
The law firm was founded in 1909 and has since been known to serve as general bankruptcy counsel to Voyager Digital in bankruptcy proceedings, which the firm filed in New York’s Southern District Court on July 5.
Voyager’s bankruptcy filing came briefly after the platform paused trading, withdrawing, and depositing due to liquidity issues.
Celsius is a centralized lending platform that receives user funds and pays 18.63% annual interest. This platform, in addition to lending services, also uses deposits to invest in other models to earn profits and maintain insanely high interest rates.
As the market goes down and bad news comes to the platform, deposits on Celsius are being withdrawn massively.
Meanwhile, the large amount of assets the company holds in stETH has lost value due to illiquidity, leading to losses if it has to be sold. Mortgage is also risky because the price of the digital currency goes down, and it is easy to liquidate assets, affecting the price of ETH and the whole market.
In June, the lending platform had to close its transaction because the liquidity assets were no longer enough for users to liquidate. Many predicted that if Celsius went bankrupt, it could be the next LUNA.
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Author: Nicholas Say