The saying when it rains it pours could not be a more accurate way to describe what is going on with the crypto industry right now. First LUNA collapsed followed by Celsius Network becoming the first of several to freeze fund withdrawals. Through all this though the crypto market seems to have finally found a bottom and has been working on bouncing back from the 52-week lows.
Celsius like many other crypto lenders has been struggling with massive liquidity issues but has a different in its PR approach to its issues. Not a lot has come from the lender however on Reddit people were able to realize that there are signs that we will soon start hearing from them again. The reason for this is Celsius has fully paid off its $440 million loan from Maker Vault and withdrew WBTC currently worth $440 million from the protocol and deposited it on FTX. This brings the amount that Celsius has on FTX to a whopping $531 million in WBTC.
For people who used and had funds locked on Celsius this might look good as the company has been able to tackle a huge debt it owed but all is not as it appears. The sheer amount that they currently have sitting in their wallet that they might sell part of to start payments and withdrawals could easily tank BTC resulting in the company experiencing another crisis not long after safely navigating the first one. One option that they could try first is to have everyone withdraw their WBTC and whatever they earned in interest allowing them to better isolate themselves from a possible BTC price collapse but even then it has consequences with people being able to figure out that that is the plan.
Today a lawsuit also hit Celsius from a former employee Jason Stone who had founded a firm called KeyFi. Reading into this lawsuit though and then comparing it to the report that also just came out by Arkham Intelligence a blockchain analysis firm there are a ton of questions that need to be answered by Stone. First and foremost in his lawsuit he states that his company entered a handshake agreement with Celsius which is a crazy thing to agree to by both sides but especially him since he did not do a good job at all managing funds.
KeyFi which operated the yield farming account 0xb1 according to the Arkham report lost $390 million. Celsius lent the 0xb1 wallet a total of $530 million total and when the funds were returned they were worth $1.13 billion representing a 111% profit the close becomes evident when you look at how Bitcoin and Ethereum performed on the market. During the time that KeyFi had the funds, the general market performance had Bitcoin returning 400% and Ethereum returning 900% over the same time. This means that the $530 million investment if it had just been held would have been $1.52 billion close to $400 million more than 0xb1 appears to have returned.
With this lawsuit now filed Celsius is in for a rough time but so is Jason Stone as the report that has come out makes him seem like a lucky manager rather than someone actually good at his job. Overall this creates a tough position with Celsius and what their next move is. They have to balance half a billion in WBTC in their wallet and refute or fight back against this lawsuit that has now been filed. Whatever they do is going to be watched like a hawk and could destroy any sort of forward momentum the crypto markets have generated.
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