Celsius Network LLC is a bankrupt cryptocurrency lending company. Headquartered in Hoboken, New Jersey, Celsius maintained offices in four countries and operated globally. Users could deposit a range of cryptocurrency digital assets, including Bitcoin and Ethereum, into a Celsius wallet to earn a percentage yield, and could take out loans by pledging their cryptocurrencies as security. As of May 2022, the company had lent out $8 billion to clients and had almost $12 billion in assets under management.
In June 2022, the company gained notoriety when it indefinitely paused all transfers and withdrawals due to "extreme market conditions", resulting in steep declines in the price of bitcoin and other cryptocurrencies. On July 13, 2022, Celsius filed for Chapter 11 bankruptcy.
Business model
The company facilitated lending and borrowing for its users. Depositors earned interest by depositing qualifying cryptocurrencies, with the rate of interest dependent upon the cryptocurrency deposited (e.g., up to 6.2% interest on bitcoin). The company paid the interest in cryptocurrencies, including in its own CEL token. Borrowers paid between zero and 8.95% on bitcoin-backed loans, depending on the loan-to-value ratio. Some of the money that Celsius used to fund the loans came from hedge funds that were looking for higher yields than banks pay.
Celsius generated revenue from token sales, lending, bitcoin mining, and discretionary trading of cryptocurrencies. Celsius claimed that up to 80% of its revenue was returned to its user community through interest payments on deposits made through its platform. The company did not charge any fees to its users.
On July 7, 2022, former investment manager Jason Stone sued Celsius, alleging that the company ran a Ponzi scheme. On August 23, Celsius sued Stone, alleging that he lost or stole tens of millions of US dollars' worth of cryptocurrency. The independent examiner's report filed on January 31, 2023, as part of the bankruptcy filing, said that an insider at Celsius described aspects of the business model as "very ponzi like". In an internal memo, coin deployment specialist Dean Tappen stated "that his title at Celsius should be 'Ponzi Consultant.'"
History
Celsius was founded in 2017 by Alex Mashinsky, Daniel Leon, and Nuke Goldstein.
Growth
In March 2018, Celsius raised $50 million in its initial coin offering (ICO) of the CEL digital currency. In April 2018, the CEL cryptocurrency began trading on cryptocurrency exchanges. In advance of the ICO, Celsius listed its currency as a security. In June 2018, Celsius launched its mobile app. In 2019, Celsius completed a $24 million equity round at $140 million valuation.
Celsius was a major buyer of its own token, buying CEL interest it owed to customers on the open market. Crypto analysis firm Arkham Intelligence estimated Celsius had spent $350 million on purchases since July 2019.
In August 2020, Celsius raised $20 million via an equity crowdfunding to support its operations. In the fall of 2020, the price of Celsius's currency climbed more than 230% in less than a month.
In October 2020, the company reported that its CEO, Alex Mashinsky, sold $500,000 worth of CEL tokens in one transaction. In December 2021, Mashinsky tweeted, "All @CelsiusNetwork founders have made purchases of #CEL and are not sellers of the token." Based on public data, Arkham Intelligence estimates that Mashinsky sold $44 million worth of CEL through exchanges.
In November 2020, Celsius said it had plans to open an office in Australia and to expand its office in Israel.
In December 2020, Celsius had $3.31 billion in assets under management. In January 2021, Celsius had more than $4.5 billion in assets.
In October 2021, Celsius raised $400 million in new equity from investors. The funding round was led by WestCap, the fund led by former Airbnb executive Laurence Tosi, and CDPQ, Canada's second largest pension fund. The funding round valued Celsius at $3 billion. At this time, Celsius's office in Israel employed 100 people.
In November 2021, Celsius acquired the Israeli cybersecurity company GK8 for $115 million.
Controversies and regulatory scrutiny
On April 16, 2021, Celsius confirmed that a security breach had occurred in its systems; a third-party server with customer data had been compromised, resulting in a portion of the company's customer list being exfiltrated and a phishing email being sent to Celsius customers.
