Celsius Network News: Are We Really Looking At A Deficit Of Only $1.2 Billion US?

Documents submitted in connection with Celsius Network‘s Chapter 11 bankruptcy application show a shortfall of $1.19 billion in the company’s financial position. However, a closer look at the crypto exchange‘s financial statements reveals that the hole it’s in may be deeper than first appears.

A total of US$5.50 billion in liabilities were reported as of July 13 against US$4.31 billion in assets in the company’s disclosed balance sheet.

A number of analysts, however, are questioning whether or not the company’s crypto and mining assets and CEL tokens are worth anything now that withdrawals have been suspended due to the “crypto winter” the market is experiencing.

Other things in both assets and liabilities are creating issues about the assessment because of their unidentified character.

I think they're overvaluing their assets pic.twitter.com/LJBRwYY30Q

— Bennett Tomlin (@BennettTomlin) July 15, 2022

It’s only a few million dollars away from the book value of CEL’s digital token, which is presently trading at $0.8, which puts the company’s market cap at roughly $550 million.

Insight During a (Crypto) Collapse

The volume of digital assets on the platform “increased faster than the company was prepared to deploy,” CEO Alex Mashinsky said in the company’s Chapter 11 bankruptcy petition.

“[The] corporation made what, in hindsight, proved to be some questionable asset deployment decisions. It took some time for some of these deployment activities to unwind, leaving the company with liabilities that were out of proportion to the exceptional market falls, “according to the bankruptcy statement of Mashinsky.

Also contributing to the “increasing industry-wide reluctance to do business with businesses like Celsius” is the crypto exchange’s claim that Terra’s LUNA token and TerraUSD stablecoin have fallen out of favor, as well as the “crypto winter.”

Reluctance was made worse due to inaccurate and unsubstantiated comments about Celsius in the press and social media. “As a result of all of these circumstances, Celsius users began withdrawing big amounts and at a quick rate from Celsius’ platform,” the business explained.

By pointing to long-term, illiquid investments, third-party funding or pledges to buy bitcoin miners and GK8 storage, the companies’ assets are bound, Mashinsky emphasized that these issues arose for the company when the value of cryptocurrencies dropped and withdrawals increased. A “rapid and unexpected ‘run on the bank'” was the result.

As a result, according to the business, withdrawals had to be put on hold.

To “create meaningful recoveries to [its] stakeholders as early as feasible,” the chief executive said that filing for bankruptcy would provide the company a “breathing spell” to undertake a financial restructuring plan.