Celsius Pays Off All DeFi Loans and Files for Bankruptcy

The troubled crypto lending platform Celsius has paid off its last major outstanding debt.

Yesterday, according to Etherscan data, Celsius repaid $50 million in dai stablecoin to the decentralized finance (DeFi) protocol Compound. In return, Celsius received its collateral for the loan, nearly $200 million worth of WBTC (wrapped bitcoin).

The loan was over-collateralized, meaning that Celsius initially pledged an amount greater than the loan, which facilitates covering potential losses. 10,000 WBTC has returned to Celsius, which is currently worth about $198 million.

Liquidity Issues

Yesterday’s repayment marks the settlement of Celsius’s last major debt to decentralized financial lenders. Last month, the company received back $440 million in collateral after repaying a loan to the DeFi protocol Maker. Two days ago, Celsius similarly recovered about $415 million after significantly reducing its debt in the Aave protocol.

Repaying debt and returning collateral is no small feat for Celsius. The company was dangerously close to losing those deposits due to collateral liquidation at several points in May and June, when the drop in crypto prices risked pushing them below 150% of the value of the loans they were meant to cover.

It remains unclear whether this influx of over $1 billion in recovered debtor collateral, along with any additional liquidity the company has, will be enough to cover Celsius’s obligations to clients.

Just over a month ago, the lending platform, which offered users high yields of up to 18% on cryptocurrency deposits, paused all customer withdrawals, exchanges, and transfers, citing liquidity issues as the reason. The decision still stands.

First to Freeze Accounts

The company was one of the first crypto lending platforms to freeze accounts after markets began to significantly decline in early May, and since then, other platforms have followed suit. Babel Finance, CoinFLEX, and Voyager among them, have followed this example.

Celsius CEO Alex Mashinsky has not commented on Twitter since the end of last month, when he reposted a company blog stating that the Celsius team is ‘working as quickly as possible to stabilize liquidity and operations.’ The post did not mention a timeline for when customer accounts might be unfrozen.

A report published on Sunday states that the company has replaced the lawyers hired just a few weeks ago to oversee the restructuring process. Two days ago, the financial regulator from the U.S. state of Vermont labeled Celsius as ‘deeply insolvent’ and claimed that previous statements by Mashinsky and other company representatives regarding the safety of customer funds were untrue. Vermont regulators, along with those in at least five other states, are currently investigating Celsius for its decision to freeze customer accounts.

After weeks of speculation and rumors, Celsius’s lawyers officially notified regulators that the company is filing for bankruptcy under Chapter 11. According to a statement, Celsius and some of its subsidiaries have filed voluntary petitions for reorganization under Chapter 11 in the United States Bankruptcy Court for the Southern District of New York.