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Crypto Lender Celsius Raises $400M as Investors Shun Regulatory Crackdowns

Kentucky-based digital asset lending platform Celsius Network has announced its latest $400 million fundraisers as investors shun the firm’s uncertain regulatory cloud.

The Big Name Backing

According to the Celsius announcement, this funding round is led by WestCap, a growth equity firm, and Caisse de dépôt et placement du Québec (CDPQ), a global investment group. The valuation of Celsius is now placed at $3 billion following the funding round and effectively places it amongst the elite crypto unicorns.

“We are pleased by the response we received from many leading financial investors during this fundraise. The partnership with WestCap and CDPQ puts Celsius in a position to grow and further its mission to leverage blockchain technology to connect and decentralize the traditional finance,” said Alex Mashinsky, CEO of Celsius Network.

The big-name backing came despite the ongoing regulatory struggle the company is having in administering its products in key states in the United States, including Alabama, Texas, and New Jersey. According to the investors, these struggles are temporary, and Celsius’s business strategies will still foster growth even if regulators stop its flagship lending product.

“While the current regulatory attention is new, Alex Mashinsky and Celsius’ ethos has long echoed the sentiment regulators are trying to put forth in terms of consumer protections. Celsius is committed to working constructively with regulators to understand the dynamic crypto space better, protect retail customers from fraud and undue risk, and create general consumer knowledge to allow for thoughtful investment decisions,” said Laurence A. Tosi, Founder and Managing Partner at WestCap.

Since its inception back in 2017, Celsius has grown its business and has more than 1 million active customers using its platform, with a total of $25 billion in total assets transacted. The boost from investors is billed to aid the company’s diversification from its core lending products that offer 17% on deposits to its “discretionary trading” of cryptocurrencies, including “speculative trades” on price movements.

Regulators Says Lending is Security

Cutting across both federal and regional regulators and watchdogs in the U.S. are increasingly warning against crypto platforms whose offer lending products, which they suggest these products are closely related to security offerings. The SEC has stopped Coinbase from offering its proposed savings products back in September to wade off avoidable lawsuits.

With cryptocurrency outfits being squeezed in per the restrictions to the products they can offer, many may clamour for additional regulations to be defined in the coming days to avoid future conflicts of interest.

US Crypto Lender Celsius to Stop Paying Interests to Unaccredited Investors

In line with regulatory demands, American crypto lender, Celsius has shared details of a restructuring to its Earn product which will now be limited to only Accredited investors.

As announced by the company, the new regime will come into effect from April 15, and users with existing funds in their Earn accounts will continue to earn interests as long as the funds remain in such accounts.

The new move implies that new retail investors will not be able to access the Earn program. However, those accredited investors permitted by law to participate in securities offerings irrespective of the risks will be able to access the Earn product continually.

The announcement of this product change stems from broader concerns across states and was accompanied by the launch of the Celsius Custody solution for users in the United States. Through this new provision, users who do not qualify for the Earn product will still be able to “navigate across Celsius’ products, including store, access, borrow, spend, earn and grow,” in a secure manner.

“All coins transferred to Celsius by users in the United States prior to April 15, 2022, will continue to earn rewards. Those existing coins will continue to earn rewards for as long as they remain in their Earn accounts,” the announcement reads, adding that new “transfers made by non-accredited investors in the United States will be held in their new Custody accounts and will not earn rewards. Non-accredited investors can continue to swap, borrow, and transfer within their Custody accounts based on their local jurisdiction.”

SEC and the Frown at Crypto Earn Products

The United States Securities and Exchange Commission (SEC) is undoubtedly highly concerned with crypto exchanges looking to offer products that will make their customers earn interest on digital currency holdings. The commission largely sees these kinds of offerings as securities that are deemed unsuitable for most retail investors.

In a related move, Nasdaq-listed cryptocurrency exchange Coinbase Global Inc had to abandon its proposed LEND product for fear of crossing paths with the regulator who threatened to sue if it proceeded with the offering back in 2021.

Nexo AG Says Interested in Acquiring Celcius Network's Remaining Qualifying Assets

Nexo AG has released a Letter of Intent showing its potential interest in the possible acquisition of certain assets of crypto firm Celcius Network LLC and Celsius Lending LLC.

In the letter, Nexo, a major cryptocurrency lending platform based in Switzerland, stated that the company, its partners and affiliates are interested in acquiring “certain remaining qualifying assets, mainly collateralized loan receivables secured by corresponding collateral assets, brand assets and customer database of the business”.

The proposal is a non-binding bid. The letter noted that the offer is valid until 4:30 a.m., UTC (Coordinated Universal Time) on Monday, June 20, unless accepted or rejected by the seller or withdrawn by the buyer before that time.

This comes following the crypto lending platform’s Monday announcement to pause all withdrawals and transfers between accounts due to extreme market conditions.

“In service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow for this process to take place,” the official company blog reads.

Celcius has not replied to Nexo’s interest yet.

The platform, one of the biggest crypto lenders, said customers can continue to accrue rewards during the pause in line, reiterating that the network is “taking necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets,” the blog post added.

Reportedly, up to 50,000 Ethereum (ETH) and 3,500 Wrapped Bitcoin (WBTC) were being moved to an address located in FTX a few hours ago before the suspension, according to an alert citing King Data’s Etherscan. The transfer is worth around $63.64 million and $86.499 million respectively based on the current price.

The announcement has come during one of the many bumpy weekends in the crypto market. Crypto space was suffering from multiple bearish events recently, including the collapse of LUNA and UST events.

According to the latest announcement, the Celsius token (CEL) once tumbled 60% within an hour, reaching the bottom at $0.1554. It is now trading at around $0.1883 during the Asia trading section.

Furious sentiments are being shared among investors, some customers are blaming Celsius for having no response to the request of withdrawing tokens and questioning its reserve if it might result in bankruptcy.

Some market participants are now concerned about the ability of the firm, the New Jersey-based crypto lending platform, to meet its long-term debts and other financial obligations. Celsius is known in the past to have made its name by offering above-average interest rates on deposits.

According to Blockworks, Celsius was valued at $3.35 billion when it closed its “oversubscribed” Series B financing to $750 million last November. The company had processed $8.2 billion worth of loans and had $11.8 billion in assets, its website showed.

In April, Blockchain.News reported that the Network has stopped paying interests to unaccredited investors, meaning new retail investors are not able to earn interests by joining its program.

The network remains full of uncertainty ahead in recovering its price and winning confidence among investors.

-With the assistance from Nicholas Otieno-

BitBoy Crypto to Launch Class Action Lawsuit Against Celsius

Ben Armstrong, popularly known as BitBoy Crypto is taking the cessation of withdrawals by crypto lending platform Celsius more personally and has threatened to file a class-action lawsuit against the embattled lender.

Following his announcement on Wednesday stating;

“Today we will begin the process of bringing a Class Action Lawsuit against @CelsiusNetwork and Alex @Mashinsky,” BitBoy has reportedly been talking with a legal team with respect to the best approach to take in seeking legal redress for Celsius locking up his funds.

The crypto YouTuber, whose followers number in the millions, posited that he had loans that were due on Celsius and that he could not at the very least access his locked funds to service those debts. He said despite getting confirmation from his Celsius account rep, he had to send more funds to the platform to pay off those debts.

“Our account rep at @CelsiusNetwork is @ronald_loh. He told us we had enough money in our account to pay off a loan. But we can’t use money in our account. We HAVE TO SEND CELSIUS MORE MONEY TO PAY IT OFF.” he tweeted.

Amstrong said the only reason why Celsius will not let him use his funds is that the platform is insolvent. Insolvency is a term that is used for a firm that does not have the capacity to meet its debt obligations.

“So you may be asking yourself the question, “why would they not let you pay off the loan with money/crypto/stables that are already in your account?,” he said, “IT’S BECAUSE THEY ARE TOTALLY INSOLVENT. The money that shows in our account isn’t actually there. That’s the only reason we can’t use it. It’s not there. And these idiots have the audacity to think that we are going to send more?”

While the details of the approach to the class action or the plaintiffs joining him are still unclear, Celsius still has an active offer from Nexo to buy off its collateralized loans. Amidst the complexity being seen today, the next few weeks might be more challenging for Celsius, BitBoy, and the other parties involved.

Babel Finance Reaches Agreement on Modalities for Repayment of its Loans

Following the halt of its withdrawals amidst its inability to pay its creditors as the crypto market meltdown took a bearish turn in the past few days, Babel Finance has announced measures to ease off its immediate operational burdens.

While it said when it halted its withdrawals that it was experiencing unpleasant liquidity risks, the platform noted in a Monday announcement that it has “carried out an emergency assessment of the company’s business operations to understand the company’s liquidity status,” as one of the major measures to curb its current woes.

A major step the company said it is taking is that it has reached an agreement with some of its stakeholders, who are willing to give it a flexible time to repay its loans while sourcing for liquidity across the board.

“We have communicated with major counterparties and relevant customers and reached preliminary agreements on the repayment period of some debts, which has eased the company’s short-term liquidity pressure,” the firm said, “We have actively communicated with shareholders and potential investors, and will continue to communicate and obtain liquidity support.”

While Babel Finance has highlighted its plans to continually update its community about its plans and measures to get right into business, the platform said it is committed to fulfilling all of its obligations to reduce its liquidity risk shortly.

Besides Babel Finance, more players in the crypto lending ecosystem are also on edge at the moment as liquidity risks have become a mainstream occurrence. Celsius Network is the most prominent of these players, with its major operations halted due to extreme market conditions.

While Celsius seems to have shunned the offer from Nexo, which wants to buy up its collateralized loans, the embattled platform said it needed more time to come up with a sustainable solution for all.

Celsius Repays Compound Finance $10m Worth of DAI

Crypto lender Celsius Network has repaid interest-yielding DeFi service Compound Finance with $10 million worth of the DAI stablecoin, according to a report from Crypto Briefing.

The payment is likely to be an attempt to re-establish solvency following a recent episode of suspension of withdrawals, swaps and transfers, which resulted in rumours of insolvency. Currently, those services are still under suspension.

Crypto Briefing reported that Celsius has made a number of other repayments over the past week. Celsius has paid $53.6 million DAI in a series of transactions to its vault with Oasis Protocol, a yield-bearing DeFi platform.

According to Gemini, DAI is an algorithmic stablecoin issued by Ethereum-based protocol MakerDAO, which seeks to maintain an exact ratio of one-to-one with the US dollar.

Celsius, an Etherscan block explorer, uses DeFi protocols to generate interest for its clients.

Although the $10 million payment is only a small fraction of Celsius’ activity, this step is likely a move towards solvency. The payment is also a potential move to close positions with clients to regain liquidity and re-open withdrawals.

Celsius’ repayment comes shortly after the company confirmed through a blog that the suspension of withdrawals, transactions and swaps will continue.

“Our objective continues to be stabilising our liquidity and operations,” the firm wrote on June 19. It added that this “will take time” and that it will “continue to work around the clock.”

Celsius has also stated that it will cooperate with regulators and officials in investigating the company’s suspension of services.

Celsius further confirmed that it would pause Twitter activities and AMAs to prioritise resolving the current situation.

BlockFi Lands $250m Credit Facility from FTX Derivatives Exchange

Struggling digital assets company BlockFi has received a $250 million credit facility from FTX Derivatives Exchange as it looks to survive the current downturn in the crypto industry.

BlockFi CEO Zac Prince announced on Tuesday that the company is now on track to bolster its balance sheet and general platform strength.

The utilization of the new credit facility will be primarily centred on being deployed as a contractually subordinate capital to “all client balances across all account types (BIA, BPY & loan collateral)”, with Zac promising that the funds “will be used as needed.”

FTX’s latest action is described as a rescue mission in restoring the confidence of the recent crash of the crypto market. Over the past few weeks, the market was being challenging for digital currency asset providers, particularly crypto lenders. Celsius Network halted its withdrawals and virtually all of its core operations and said that it would need more time to resume its operations recently. In its efforts to resolve its current woes, Celsius has started repaying its outstanding loans, sending $10 million in DAI stablecoin to Compound.

While BlockFi’s woes are not as pronounced as Celsius Network’s or Babel Finance’s, the firm has unveiled plans to cut operational costs by laying off 20% of its workforce. Zac commented on the secured credit facility and said the funds would bolster its working relationship and collaboration with FTX.

“Throughout the market volatility of the last several weeks, I’m incredibly proud of how our team, platform, and risk management protocols have performed. Today’s landmark announcement reinforces BlockFi’s commitment to serving its clients and ensuring their funds are safeguarded,” Zac said in the tweet, “This agreement also unlocks future collaboration and innovation between BlockFi & FTX as we work to accelerate prosperity worldwide through crypto financial services. This is a significant step forward in our commitment to the strength and accessibility of crypto markets.”

Zac reiterated BlockFi’s commitment to its customers, adding that it will weather this current storm as it has always.

Celsius Denies Allegation of CEO Leaving US

Celsius Network on Monday denied reports of the CEO leaving the US, claiming that all related allegations are false.

A spokesperson from Celsius responded to Blockchain.News saying:

“Consistent with our previous messages, all Celsius employees – including our CEO – are focused and hard at work in an effort to stabilize liquidity and operations. To that end, any reports that the Celsius CEO has attempted to leave the U.S. are false.”

The crypto lender platform’s CEO Alex Mashinsky was reportedly stopped by authorities from leaving the U.S., amid insolvency rumours about his company.

Mashinsky’s failed exodus was first disclosed by crypto analyst Mike Alfred on his Twitter account on Sunday local time. He tweeted saying Mashinsky was trying “to leave the country this (last) week via Morristown Airport (in New Jersey) but was stopped by authorities.”

According to Alfred, the Ukraine-born CEO was trying to flee to Israel. However, his claims and sources have not been verified.

Alfred’s tweet also added that Mahinsky current whereabouts are unclear. Details about whether he is under custody are yet to be revealed.

The cryptocurrency loan company allows users to deposit cryptocurrency digital assets into a Celsius wallet to earn a percentage yield or take out loans by placing their cryptocurrencies as security.

Currently, the crypto market is under high volatility since the US FED’s increase in interest rates in early May 2022.

Rumours about insolvency have been floating around since Celsius decided to freeze withdrawals, swaps or transfers among all accounts in June, citing extreme market conditions. The company has repeatedly claimed that it would take time to resume its operation.

However, the company has started repaying clients to regain liquidity and re-open withdrawals. Recently, Celsius repaid interest-yielding DeFi service Compound Finance with $10 million worth of the DAI stablecoin, according to a report from Crypto Briefing.

According to a report from Blockchain.News, Celsius has also paid $53.6 million DAI in a series of transactions to its vault with Oasis Protocol, a yield-bearing DeFi platform.

Furthermore, Celsius has also stopped unaccredited investors from paying interest since April 15. Under the new plan, users with existing funds in their Earn accounts have continued to earn interests as long as the funds remain in such accounts.

The platform has recruited experts from Citigroup on possible solutions for financing options to battle insolvency fears. The Wall Street Journal indicated that Celsius has even hired consultants from advisory firm Alvarez & Marsal to seek advice or possibly bankruptcy filing.

According to a report from Coindesk, Goldman Sachs is planning on acquiring Celsius by raising $2 billion from investors.

Celsius network has over $12 billion in Assets Under Management and over $8 billion in assets lent out to investors. With the notion of bankruptcy on the horizon, Celsius Network is also acting in a way that will heighten people’s suspicion.

Meanwhile, according to a report from Washington Post, Celsius’ recent activities have also drawn regulators from at least five States, including Texas, New Jersey, Alabama, Kentucky and Washington, to investigate.

Subject to the latest rumour, Celsius’s token (CSL) has dropped to over 20%, trading at around $0.7939 during the intraday.

CoinLoan Announces Temporary Reduction of Withdrawal Limit

Crypto-backed loans provider CoinLoan has temporarily reduced the withdrawal limit for traders. The company explained that the move was made due to the current market turmoil.

Following the announcement, customers have been restricted to a maximum withdrawal limit of $5,000 every 24 hours.

“The interest we pay on the Interest Accounts is yielded by issuing overcollateralized loans to other platform users. Hence in some instances, the estimated date of a complete withdrawal of assets from the Interest Accounts comes before, not after, loan closure,” CoinLoan stated in the announcement.

The company has imposed the withdrawal limit “to balance the flows of funds and prevent liquidity-related interruptions.”

According to The Block, the European crypto lender’s restriction of withdrawals has been the latest case among a series of recent high-profile crypto businesses that have restricted withdrawals due to various forms of financial distress following the recent turmoil in the market.

The issues that have affected Celsius, Voyager, BlockFi, and Three Arrows Capital have triggered a wave of withdrawals, CoinLoan stated.

Celsius Hires New Lawyers for Restructuring: WSJ

Celsius Network LLC has hired new lawyers to advise the troubled cryptocurrency lender on restructuring, according to a report from the Wall Street Journal (WSJ).

The much-needed restructuring plan has come as it seeks to escape the recent turmoil in crypto markets, the WSJ said, citing people familiar with the matter.

According to the WSJ report, Kirkland & Ellis LLP lawyers have been called on board to advise Celsius on options, including a bankruptcy filing.

The lawyers have replaced the company’s previous lead restructuring counsel, Akin Gump Strauss Hauer & Feld LLP.

Since the company’s stagnation due to the market plunge, it has been in an unstable liquidity position. As part of its recovery efforts, Celsius has also appointed Citigroup to advise it on potential financing options.

The WSJ reported that Celsius is also reshuffling its board as they appointed two new directors last week.

Customers of the company, who reported $11.8 billion in assets in May and 1.7 million users, have not been able to access their Celsius accounts for nearly a month after it froze user withdrawals as crypto prices plunged.

Celsius was looking to avoid lengthy bankruptcy proceedings, The Block reported citing people familiar with the company’s situation.

On June 30, Celsius shared a blog post with the community saying it was continuing to take “important steps to preserve and protect assets and explore options available to us.”

“These options include pursuing strategic transactions as well as a restructuring of our liabilities, among other avenues,” said the post. “These exhaustive explorations are complex and take time, but we want the community to know that our teams are working with experts from many different disciplines.”