Celsius Network claimed on July 7 that it has paid off all its debt. On the same day, it faced a lawsuit from a former employee
Celsius Network continues to face trouble even after declaring that it has become debt-free. The crypto lender, which has been in a tight spot for some time, announced on July 7 that it got rid of all its debt, indicating its troubles were over. However, on the same day, it got into another controversy when a former employee filed a lawsuit against the company.
Celsius Network is a major player in crypto financing, having raised $750 million in funding late last year, Reuters reported. It offers interest-bearing products to customers who deposit their cryptocurrencies with the company and lends out cryptocurrencies to earn a return.
A Day Of Ups And Downs
On July 7, Celsius Network announced that it had fully repaid a loan on Maker, one of the biggest decentralised finance (DeFi) platforms, and was able to reclaim $440 million in collateral.
“Celsius Network has completely paid off its #Bitcoin loan. Their liquidation price has dropped to $0.00,” tweeted @WatcherGuru.
However, later on the same day, it was reported that a former investment manager at Celsius filed a lawsuit against the company, alleging that it had frozen customer funds and had rigged the price of its own cryptocurrency token with user contributions.
According to the complaint, Celsius engaged in “gross mishandling of client deposits” in order to enrich itself, and deceived plaintiff KeyFi Inc, run by former manager Jason Stone, into providing services worth millions of dollars, while refusing to pay for them, according to various media reports.
Series Of Mistakes
Celsius has been in trouble since December 2021, when it lost $54 million worth of Bitcoin that it had invested with the DeFi platform BadgerDao to hacking. At the time, Celsius CEO Alex Mashinsky stated that the company lost money, although he did not specify how much.
A few months ago, Celsius invested in the Anchor protocol, which was offering deposits of TerraUSD with up to 20 per cent returns. According to available blockchain data, Celsius withdrew more than $535 million in cryptocurrency from Anchor as TerraUSD plummeted.
Another choice that went wrong was the decision to invest in Ether tokens with Lido Finance, a DeFi platform, in June 2022. According to Andrew Thurman, an analyst at analytics company Nansen, which analyses blockchain data, it had at least $450 million in ETH in its main DeFi wallet and is likely holding more elsewhere. Ether fell drastically recently, eroding the value of Celsius’s investment.
In the process, Celsius amassed huge debt, which it has been settling in parts. It was on Thursday that it claimed that it had paid off everything.
How Did It Affect Investors?
On June 12, Celsius stopped all customer withdrawals and transactions to prevent a run on the bank.
“But we believe that our decision to pause withdrawals and transfers between accounts is the most responsible action we can take to protect our community. We are working with a singular focus to protect and preserve assets to meet our obligations to customers,” Celsius said in its blog post.
Recently, Celsius also laid off 150 employees owing to the financial crisis. Last month, the company had stopped accepting customer withdrawal requests, on grounds of “extreme market conditions”. The company had said in June that it was looking at ways to “preserve and protect assets”, as it faced the possibility of insolvency, reported Coindesk.