Celsius’ Court Filings Show Negative Liquidity by Oct 22, CEO Under Scanner Once Again

Celsius Network’s latest court filings depicted a grim forecast for the crippled crypto lender. The documents revealed that the actual debt currently stands at $2.85 billion, as against their bankruptcy filing claims of a $1.2 billion deficit.

The firm is expected to run out of cash by October as per the filing with the United States Bankruptcy Court of the Southern District of New York. By then, Celsius would hit negative liquidity of approximately $34 million.

Celsius Crisis Deepens

In addition to a steep decline in liquidity, the three-month cash flow predicted that Celsius will see an almost 80% fall in liquidity funds from August to September. For the next three months, the company’s operating costs and other expenditures, such as its restructuring efforts, are estimated at $137 million approximately.

The New Jersey-based company filed for Chapter 11 protection on July 13, listing a $1.19 billion deficit on its balance sheet. Celsius, along with a host of other crypto lending platforms, came under fire following a sharp crypto market sell-off triggered by the collapse of major tokens TerraUSD (UST) and Luna in May.

But Celsius’ ambitious expansion plans in the crypto mining space may not stop anytime soon. In fact, the United States (US) Bankruptcy Judge Martin Glenn even approved the development of a new Bitcoin mining facility.

However, building a new one would require using existing funds, which could come up to $3.7 million. An additional amount of $1.5 million was also approved by the Judge to be deployed on a matter related to customs and duties on imported Bitcoin mining rigs.

Mashinsky’s Alleged Clashes

In the months leading up to Celsius’ collapse, its CEO Alex Mashinsky reportedly influenced trading decisions, according to Finance Times. The exec, who had asserted that the banks have abused their power on multiple occasions, reportedly took over the platform’s trading strategy in January 2022, right before the Fed meeting.

Sources familiar to FT claimed that Mashinsky was concerned about a potential downfall in crypto prices if the Fed hiked interest rates.

It was then that the CEO dismissed senior traders on its platforms. He even ordered Celsius’ trading team to dispose of hundreds of millions of dollars worth of Bitcoin, which the company had to purchase back the next day at a loss. In January alone, Celsius lost $50 million via trading.

Mashinsky also allegedly had multiple fallouts with Celsius’ former chief investment officer Frank van Etten regarding trading decisions and his influence on the trading strategy. Shortly thereafter, Van Etten exited.

It looks like Celsius’ legal troubles are far from over. On August 8, California’s Department of Financial Protection and Innovation (DFPI) issued a desist and refrain order to prevent the platform from engaging in the sale and marketing of securities in the state. The authorities also accused the lender of offering unregistered digital securities to investors and alleged that Mashinsky made “materially” misleading statements.