The Celsius Bankruptcy Plan: HODL and Mine

Hello and welcome to Protocol Fintech. This Tuesday: Celsius’ restructuring plan, Goldman’s solid results and Wefox’s big round.

out of the chain

A yacht. A mansion. How far did the excesses of the founders of Three Arrows Capital go? Details are now emerging through bankruptcy filings. One of the founders was thinking particularly big before crypto prices plummeted. “Think about buying all the good-class bungalows in Singapore and turning them into parks and regenerative agriculture,” Zhu Su tweeted Last year. He also thought of Elon Musk building a “self-contained” vessel that would mine bitcoin at sea. Given how Tesla’s autopilot works, I’m not sure I’m boarding this vessel.

—Owen Thomas (E-mail | Twitter)

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Long story short

Customers of Celsius who have been locked out of their cryptocurrency accounts for more than a month may have to choose between taking a discount on what is owed to them in cash or waiting until token values ​​recover . During a bankruptcy hearing on Monday, lawyers for the crypto lending firm detailed its plan to resurrect the business.

“This is not a liquidation,” said Patrick Nash, attorney at Kirkland & Ellis, representing Celsius. “We do not intend to force customers to take their recovery in fiat currency. All is not lost.”

Celsius customers are angry. This was acknowledged by Nash. “The anger and frustration were exacerbated, in my view, by the company’s relative silence” which led to the bankruptcy, he said.

  • The company filed for Chapter 11 bankruptcy in New York’s Southern District Court last week and, in a Monday filing ahead of the hearing, presented his plan recover from its current crisis.
  • This includes a plan to “offer customers the option, at the customer’s option, to cash out with a discount or go ‘long’ crypto,” as described in the presentation. The court should approve this plan.
  • The company had about 300,000 customers worldwide as of July, according to its bankruptcy filings. Many of them will want to get all the assets they can repay in US dollars or another fiat currency, Nash said, but the company is also betting there are more “interested in getting over what’s going on.” we call the winter crypto”.

Celsius’ financial situation is not pretty. CEO Alex Mashinsky, who was on video in a suit and tie during Monday’s hearing, detailed the company’s significant cash crunch in a filed in bankruptcy court last week.

  • Celsius has a $1.2 billion shortfall between its liabilities and its assets. Its liabilities include $4.7 billion owed to Celsius users, according to Mashinsky’s filing.
  • Founded in 2017, Celsius marketed itself as a banking alternative and offered high-yield accounts to users by investing or lending their deposits. But as crypto prices fell rapidly, the company froze all withdrawals, trades and transfers between accounts on June 12, citing extreme market conditions.
  • New numbers dropped on monday show how quickly the crypto crash wiped out Celsius. The company had $14.6 billion in crypto assets as of March 30 and only $1.75 billion as of July 14. Users withdrew nearly $2 billion from their accounts during this time, while the market value dropped by $12.8 billion.

Celsius wants to get off the hook. The company has a bitcoin mining subsidiary, Celsius Mining.

  • Celsius hopes to mine around 10,000 bitcoins in 2022 and expand from there in 2023, which could be a “valuable source of recovery,” Nash told the court, assuming the crypto market rebounds.
  • Celsius sold some of its machines at prices sold off in June before its bankruptcy filing, but it still has more than 80,000 devices.
  • The company is also selling assets and seeking “third-party investment opportunities,” as described in its presentation.

Celsius and rival crypto lender Voyager, which filed for bankruptcy a week earlier than Celsius, are hoping to restructure as going businesses and will need customers to trust them with their money to do so. That could be a tough sell, given the anger Celsius’ own attorney acknowledged on Monday.

Restricting withdrawals “erodes client confidence” and makes it much more difficult to reorganize in bankruptcy court, wrote Adam Levitin, a Georgetown University law professor who studies bankruptcy, in an editorial published on Monday by The Affair. “No customer will trust a financial services company that has lost their money,” Levitin wrote. “When financial services companies file for bankruptcy, they usually end up being liquidated. The same is likely true for cryptocurrency companies.” If Celsius wants to prove that it is an exception to the rule, hopefully its customers’ hunger for crypto outweighs their anger.

—Ryan Defenbaugh (E-mail | Twitter)

on the money

On protocol: Bankrupt crypto hedge fund Three Arrows Capital owes creditors $3.5 billion. The largest creditor, with a $2.3 billion loan, is a unit of crypto prime broker Genesis, which is owned by Digital Currency Group.

Coinbase got a regulatory boost in Italy. The company said monday it won approval from Italian regulators to continue operating in the country, after the country’s Organismo Agenti e Mediatori established new rules for companies offering crypto trading.

Dutch regulators hit Binance with a $3.4 million fine. The Dutch central bank, De Nederlandsche Bank, said Binance was operating without proper registration. The company said it was working with regulators and would appeal.

The Consumer Financial Protection Bureau wants banks to reimburse more customers who have been scammed on Zelle and other money transfer services. The agency is plans to go out new guidelines in the coming weeks.

Also on Protocol: The FBI issued a warning Monday for financial institutions and investors urging them to beware of fake crypto apps, which have already cost victims more than $40 million.

Voyager and Celsius have the same law firm guide their bankruptcies. Kirkland & Ellis, the largest law firm in the world, is dealing with the crypto crash.

Goldman Sachs’ consumer and wealth management unit, including digital bank Marcus, posted record revenue of nearly $2.2 billion in the second quarter. It’s finish 25% compared to the same period last year, according to the company. Marcus is always would have bled moneyyet.

Understood

“Someone just called a brief sync before a bigger meeting on ‘premint’ and I’m done for the day,” said home brew partner hunter’s marchand yeah.

representative Jim Himesan old Goldman Sachs banker, watched Congress learn about crypto in real time: “Five years ago, if you talked about cryptocurrency, there would be two people in this building who would know what you’re talking about,” he Told Desk corner.

Deal flow

German digital insurer Wefox raised $400 million in its Series D round. Abu Dhabi’s Mubadala led the round, valuing the unicorn at $4.5 billion despite generally falling valuations in insurtech.

Lightspeed Venture Partners led a $25 million Series A round in Robinhood’s European competitor, Lightyear. Richard Branson also participated in the round.

Hidden Road Partners, a top crypto brokerage in New York, has raised $50 million in a Series A funding round. Castle Island Ventures led the round, with participation from FTX and Coinbase Ventures.

Mysten Labs is looking to raise a $200 million Series B funding round led by FTX Ventures, reports the information. That would put the Palo Alto blockchain infrastructure startup at a $2 billion valuation.

DeFi Morpho Lending Protocol raised $18 million in a round led by A16z and Variant. The round, raised via a native token sale, also saw participation from Coinbase Ventures, Spark Capital, Standard Crypto, Cherry Crypto, Nascent, and Semantic Ventures.

Indian startup FPL Technologies, known for its OneCard credit card, has raised over $100 million in a Series D round. Temasek led the round with participation from Sequoia Capital India and Hummingbird Ventures. That puts the company at a post-money valuation of $1.4 billion.

Pico, financial infrastructure and data analytics company raised $200 million of private equity firm Golden Gate Capital. The company says it will use the funds primarily for mergers and acquisitions.

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Thanks for reading – see you tomorrow!

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