On Sunday night, with cryptocurrency markets already in freefall, controversial crypto lending company Celsius announced that it was suddenly pausing all customer withdrawals, exchanges and transfers. Journalist Colin Wu identified from blockchain analysis that Celsius has made massive transfers of its funds in the last three days. There were 104,000 ethers (about US$129 million) and 9,500 wrapped bitcoins (about US$228 million).
Update: Celsius has transferred about 104,000 ETH to FTX in the past three days, including about 50,000 ETH today, 12,000 ETH yesterday, and 42,000 ETH the day before yesterday. In addition, Celsius also transferred about 9,500 WBTC to FTX today.https://t.co/RaiJTJIVm9 https://t.co/1RQaa9fT3u— Wu Blockchain (@WuBlockchain) June 13, 2022
Comparisons with Terra LUNA and Bitconnect
“We are taking this action today to put Celsius in a better position to honor, over time, its retirement obligations,” the company wrote in a Medium blog post. “The action needed for the benefit of our entire community to stabilize liquidity and operations while taking steps to preserve and protect assets. In addition, customers will continue to accumulate rewards during the break in line with our commitment to our customers.”
.@CelsiusNetwork is pausing all withdrawals, Swap, and transfers between accounts. Acting in the interest of our community is our top priority. Our operations continue and we will continue to share information with the community. More here: https://t.co/CvjORUICs2— Celsius (@CelsiusNetwork) June 13, 2022
The company’s CEL token reacted quickly, dropping 70% in an hour from a previous high of $0.49 on Sunday to $0.15, according to CoinMarketCap. Cryptocurrency investors on Twitter drew comparisons to the recent Terra collapse, as well as the infamous Bitconnect cryptocurrency Ponzi scheme. The rest of the cryptocurrency market was also not having a good day on Sunday when Celsius shared its news, although nothing compared to the dramatic drop in CEL. Bitcoin is down 9% on Sunday at the time of writing, Ethereum is down 9%, BNB is down 9%, Cardano is down 11%, Solana is down 12% and Dogecoin is down 9%.
Income trades on deposits
Celsius was launched in 2017 and offers customers high yield for cryptocurrency deposits, which it lends to other cryptocurrency companies. It shares this business model with BlockFi and Nexo, among other players. In the past year, many regulators have made it clear that they view these high-yield cryptocurrency lending products as unregistered bond offerings; Last September, four states (New Jersey, Texas, Alabama, and Kentucky) submitted cease and desist letters to Celsius. That month, Coinbase closed its own planned Lend product after the SEC threatened to sue if it launched. investment for SEC approval. Celsius and Nexo have yet to announce similar agreements or plans. In response to the Celsius news (and the inevitable comparisons), BlockFi CEO Zac Prince tweeted late Sunday that all BlockFi services “continue to operate as normal.”
All products and services @BlockFi continue to operate normally, including loans, interest earning, trading, credit card and deposits / withdrawals. We have zero stETH exposure and exited the main positions we had in GBTC last fall.— Zac Prince (@BlockFiZac) June 13, 2022
Alex Mashinsky, CEO of Celsius, remains silent on Twitter, having only shared the company’s blog post. *Translated with permission from Decrypt.co.