Bitcoin (BTC) and cryptocurrency lending platform Celsius reportedly lost more than $350 million by making high-risk leveraged investments in decentralized finance (DeFi) platforms.
to such conclusion research firm Arkham Intelligence arrives, based on data on-chain and various clues scattered in Internet publications.
According to Arkham Intelligence, Celsius (which has kept its clients’ cryptocurrencies locked since mid-June) relied on the services of fund manager Jason Stone, CEO of KeyFi.
The report indicates that Celsius provided about $530 million in corporate funds to Stone, who used “high-risk leveraged cryptocurrency trading strategies.” The trades would not have been as successful as expected and instead resulted in forced liquidations of USD 61 million and total losses of USD 350 million.
Arkham Intelligence does not provide certainty as to how the losses occurred, although it refers to possible causes, including: trading with negative results; DeFi hacks; flaws in smart contracts; forced liquidations; and imbalances between assets and liabilities due to the volatility of cryptocurrencies.
Celsius reinvested the bitcoins deposited by its customers
It is important to remember that Celsius’s business, unlike other cryptocurrency investment platforms, was not based on making money from the difference between lending and borrowing rates. Instead, the company founded by Ukrainian-American Alex Mashinsky he invested the money deposited by his clients in other platforms that generated income for him.
As CriptoNoticias detailed, the results were not as expected. To prevent the risk of a “run” (i.e. thousands of investors deciding to withdraw funds at the same time, leaving Celsius illiquid) the company blocked the withdrawals and transfers of its users almost a month ago.
Recent news, such as the payment of their debts to MakerDAO, give Celsius customers some peace of mind. In any case, the current investigation by Arkham Intelligence is perhaps a coherent explanation for the fact that, to date, the funds remain blocked. No Celsius user can withdraw their cryptocurrencies from the platform.
CriptoNoticias contacted Celsius via email, in order to know the company’s opinion about the Arkham Intelligence report. As of the time of publication of this article, no response has been received.