Original author: @0x BoboShanti
Original compilation: Frank, Foresight News
Celsius has approximately 584,000 ETH ($1.4 billion) in its wallet and has so far transferred 92,000 ETH to Coinbase and FalconX.
Many people commented,Celsius still has more than 500,000 ETH available for sale.I think this is a wrong statement. After more than 40 hours of research, I will explain why I believe this is wrong, based on legal documents.
background
On December 27, 2023, the court approved Celsius to proceed with the MiningCo Transaction - this is a way out of bankruptcy. The key terms are as follows:
WillInvested US$225 million to establish a Bitcoin mining company;
Approximately $2.1 billion in liquid cryptocurrency (defined as BTC and ETH) is available for distribution to creditors.
Agreements with PayPal and Coinbase on the distribution of liquid cryptocurrency to creditors;
Cryptocurrencies held by Celsius
The latest court documents provide Celsius’ cryptocurrency holdings as of October 20, 2023:
888,000 ETH (or equivalent ETH);
38,000 BTC (or equivalent BTC);
Creditor Claim Category
(Note: The ETH price at the time of the claim was valued at $1,088, and further tables of asset allocation exchange ratios have not yet been released, which will determine how much ETH/BTC certain claim categories will receive based on their claim amount, but this may be close to the current price.)
Additionally, specific claims figures may vary due to further case updates and fluctuations in cryptocurrency prices.
Escrow claims and general escrow claims can be withdrawn:Withdrawable escrow claims will be compensated for 100% and general escrow claims will be compensated for 72.5% of their claim amount.
These claims are distributed in kind based on the claimant’s token balance as of the filing date (June 2022).
The exact amount of tokens is not public, so for the sake of simplicity, this article uses the publicly available dollar amount - which is $206 million - for calculations.
Distribution of this portion of the claim has now begun.
Retail Borrower Deposit Claims:Simply put, as long as the borrower repays the outstanding amount, the funds will be returned in the form of BTC or ETH.
This means that $607 million is essentially unaccounted for and returned as cryptocurrency.
General income claims (and other unsecured claims): This is the most important claim category, accounting for $3.9 billion in total claims.
The issue is more nuanced and depends on voting choices and other factors. To simplify (and ignore many of the nuances): claimants on average will receive 61.2% of the total claim of about $4 billion, which equates to about $2.39 billion.
inIncludes liquid cryptocurrency (defined as BTC or ETH), as well as common shares of newly funded mining companies and litigation proceeds (if any).
Convenience claims:Again, this will be distributed in the form of liquid cryptocurrency (ETH or BTC).
Due to the different conversion rates used in determining claim amounts and the pending distribution of BTC/ETH, it is currently difficult to determine exactly how many tokens will be returned to claimants.
This portion of the claims is expected to begin issuance in the coming weeks, with conversion rates to be announced in advance.
As shown, the expected payout is approximately $350 million, including a $75 million reduction budget that will be held in an escrow account, and Celsius has likely liquidated some of its ETH holdings to fund these expenses.
also,A reserve of $613 million is also maintained for unresolved claims.We can assume that this amount will not be touched in the foreseeable future and a significant portion is expected to be allocated to claimants.
This is a combination of liquid cryptocurrency + MiningCo common stock. It is unclear what proportion of it is cryptocurrency. For simplicity, this article assumes that $613 million is all cryptocurrency.
Data summation
So overall,As of October 20, 2023, Celeius holds 888,000 ETH and 38,000 BTC.Based on pricing as of January 17, 2024, the total amount of this part of crypto assets is approximately US$3.7 billion.
According to data from Arkham, Celsius currently holds 584,000 ETH (approximately $1.51 billion) and 9,800 BTC (approximately $422 million) - a total of $1.9 billion in crypto assets.
If we assume Celsius has sold off their ETH, thenThis means that 244,000 ETH ($573 million) have been disposed of.
Since 38,000 Bitcoins were not included as of October 20, 2023, Arkham may have missed some Celsius wallets, so it is unclear at this stage how many Bitcoins have been disposed of.
Considering the current total amount of liquid cryptocurrency, this article will be based on todays price and assume that Celsius still owns all 38,000 BTC, and that the distribution ratio between ETH and BTC is 60/40.
Based on the previous picture:
$613 million as a reserve for unresolved claims (60% ETH: approximately 156,000 ETH);
$350 million spent (60% ETH: approximately 89,000 ETH)
The $124 million escrow claim will be distributed in cryptocurrency (perhaps only 26,000 ETH according to previous calculations) and has been ongoing since November 2023;
$242 million in convenience claims returned in cryptocurrency (60% ETH: 62,000 ETH);
$2.1 billion for unsecured claims (including general income claims) (60% ETH: 536,000 ETH);
in conclusion:
The starting balance is 888,000 ETH
Subtract 89,000 ETH fees = 799,000 ETH;
Subtract 156,000 ETH reserves = 643,000 ETH;
Subtract 26,000 ETH for escrow claims = 617,000 ETH;
Subtract 62,000 ETH for distribution convenience claim = 555,000 ETH;
Then there are unsecured claims (such as general revenue claims) that need to be distributed, which account for the vast majority of claims, for which $2.1 billion of liquid ETH and BTC are expected to be allocated.
If we still assume that the ratio is 60% ETH and 40% BTC, based on the current price, this is 536,000 ETH, that isCelsius currently holds only 584,000 ETH.
andCelsius cannot sell all ETH or they will not be able to meet their legal obligations to creditors.
It’s worth noting that both Coinbase and PayPal are distribution agents claimed under MiningCo’s trading terms, so it’s possible that Celsius will make additional transfers to Coinbase in the near future. This doesnt necessarily mean they are selling (as mentioned above, their selling is extremely limited).
One thing to note is that large transfers to Coinbase and FalconX only began on November 13, 2023 — just days after the bankruptcy court confirmed the original bankruptcy plan.
Clauses in the plan provide for Celsius to pay certain escrow accounts (such as professional fees) in cash as soon as possible - which may explain its deposit with FalconX.
At this time, certain escrow claimants are also eligible to withdraw their physical tokens, which may explain the Coinbase transfer.
There is also approximately 156,000 ETH being held in a separate reserve account for unresolved claims - which may explain several transfers from Coinbase.
Conclusion: There is a gap in Celsius’ ETH
As far as the current situation is concerned:
Celsius currently has 584,000 ETH, and approximately 536,000 ETH will be distributed in physical form to creditors with unsecured claims; 62,000 ETH will be distributed in physical form to facilitate claims; approximately 26,000 ETH may have been sent to Coinbase and Paypal to handle escrow claim distribution.
According to this calculation, there is currently a gap in Celsiuss ETH (based on the 60/40 allocation ratio), soCelsius is extremely limited in what it can do with its remaining ETH holdings.
Considering the transfers to FalconX over the past few weeks, it is likely that Celsius has sold the ETH it needed to sell to fund stated fees and expenses (such as the $225 million MiningCo capitalization and professional fees).
The effective date is expected to begin around January 31, 2024, and distribution should begin in full thereafter. In short, it is unlikely that Celsius has more (if any) ETH available to actually sell.
The crazy details behind Celsius
BTW, the Celsius case is pretty crazy, here are some amazing facts I found in the documents that arent widely reported:
Celsius invested approximately $950 million in Grayscale when GBTC was trading at a 40% premium. However, the GBTC premium quickly turned negative, resulting in a loss of approximately US$130 million for GBTC and a loss of US$30 million for other grayscale assets.
This transaction was dubbed the “Widowmaker” and led to the downfall of many crypto giants such as Three Arrows Capital.
On February 2, 2021, Celsius transferred 35,000 ETH (equivalent to $88 million today) to StakeHound to be staked locally with validators.
3 months later,StakeHound informed Celsius that the validators private key was lost - causing this portion of ETH to be locked forever.
StakeHound blames Fireblocks, which denies this, and there are currently several related court cases pending in the United States and Israel.
If the private key is indeed lost forever, then this will increase the deflation of ETH.
Celsius accepted loan collateral in the form of FTT and SRM from FTX and Alameda Research.
It is worth noting thatCelsius $814 million loan to Alameda Research was partially collateralized by a $520 million FTT.
By May 2022, FTT and SRM account for 50% of all collateral committed by Celsius.
Celsius introduced a credit rating system for institutional loans and does have credit limits. However these rules are not always followed and many loans significantly exceed the credit limit, for example:
The loan provided to Tether is 2 times its credit limit;
The loan to Three Arrows Capital was 3 times its credit limit;
Early 2022,Celsius has deployed at least $300 million in ETH on Terras Anchor protocol.
Their risk team objected, but ultimately went ahead and by the time Terra collapsed, Celsius had $900 million deployed on Terra.
Fortunately, they acted quickly during the UST decoupling and only lost about $30 million.
Celsius dabbled in exchange trading strategies, but it seemed like a costly business venture for them, butLosses amounted to $150 million due to failed cash and arbitrage trades.
In January 2022, BTC fell from $69,000 to a low of $30,000 in 2 months, and the former chief risk officer of Celsius claimed that CEO Mashinky instructed the trading department to sell all BTC on January 23 and 24.
This resulted in Celsius net selling about 6,750 BTC, and a few days later CEO Mashinky issued an order to repurchase 3,750 BTC via Whatsapp.
Celsius strategy was not to enter directional trades, but Mashinky allegedly circumvented that strategy, including going past finance and risk leadership and directly instructing the trading desk to sell (at the bottom) only to buy back days later at a higher price .
Additionally, Celsius staff were clearly extremely concerned about Mashinkys comments during live shows. The situation got so bad that several Celsius employees were tasked with removing all traces of it from the Internet.
Celsius spent more than $350 million buying CEL from the secondary market, sometimes even without the capital to do so(Hint: You are the benefit).
At the same time, the CEO and other executives sold large amounts of their personal holdings of CEL tokens.
Im not a lawyer, and the above is my interpretation of the current situation at Celsius, and there may be some errors or misunderstandings due to reading thousands of pages and tons of documents over the past few days.
I welcome anyone who has been following the Celsius bankruptcy to correct me or leave a comment and tell me why I should no longer be bullish on ETH.
