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Over 500,000 ETH to be sold? The data and madness behind Celsius.

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Celsius holds approximately 584,000 ETH, but most of it will be distributed in physical form to creditors, resulting in a shortage of ETH. Therefore, it has extremely limited options for what it can do with the remaining ETH.

Original author: @0xBoboShanti

Original translation: Frank, Foresight News

Celsius has approximately 584,000 ETH (1.4 billion USD) in its wallet, and has so far transferred 92,000 ETH to Coinbase and FalconX.

Many people have commented that Celsius still has over 500,000 ETH available for sale, but I believe this is a misconception. After more than 40 hours of investigation, I will explain based on legal documents why I think this is incorrect.

Background

On December 27, 2023, the court approved Celsius to continue the "MiningCo transaction" - this is a way for it to get rid of bankruptcy, and the key terms are as follows:

· Establish a Bitcoin mining company with a capital injection of $225 million;

· Approximately $2.1 billion worth of liquid cryptocurrencies (defined as BTC and ETH) can be distributed to creditors.

· Agreed with PayPal and Coinbase to distribute liquid cryptocurrencies to creditors;

Celsius 持有的加密货币

Cryptocurrencies Held by Celsius

The latest court documents provide information on Celsius' cryptocurrency holdings as of October 20, 2023:

· 88.8 million ETH (or equivalent ETH);

· 38,000 BTC (or equivalent BTC);

Debtor's creditor claim category

(Note: Claims will be valued at a price of 1088 USD per ETH, and further 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 current prices.)

In addition, due to further updates on the case and fluctuations in cryptocurrency prices, the specific claim amount may vary.

可提取托管索赔和一般托管索赔：可提取托管索赔将获得 100% 的赔偿，一般托管索赔将获得占其索赔金额 72.5% 的赔偿。

Translation:

可提取托管索赔和一般托管索赔：Extractable custody claims will receive 100% compensation, while general custody claims will receive 72.5% compensation of their claim amount.

These claims are distributed in physical form based on the token balance of the claimant as of the application date (June 2022).

The exact amount of the token is not disclosed, so for simplicity, this article uses the publicly available dollar amount of 206 million dollars for calculation.

This part of the claims distribution work has already 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 US dollars are essentially not included in the calculation and are returned as cryptocurrency.

General unsecured claims (including other unsecured debts): This is the most important category of claims, accounting for up to $3.9 billion in total claims.

This issue is more subtle and depends on voting choices and other factors. For simplicity (and ignoring many subtle differences), on average, claimants will receive about 61.2% of the total claims amount, which is approximately $4 billion, equivalent to about $2.39 billion.

It includes "liquid cryptocurrencies" (defined as BTC or ETH), as well as common stocks and litigation proceeds (if any) of newly funded mining companies.

方便索赔（convenience claims）: Similarly, this will be distributed in the form of liquid cryptocurrencies (ETH or BTC).

Due to the different exchange rates used to determine the claim amount and the allocation of BTC/ETH, it is currently difficult to determine how many tokens will be returned to the claimants.

It is worth noting that the $814 million loan provided by Celsius to Alameda Research is secured by $520 million of FTT.

By May 2022, FTT and SRM will account for 50% of all collateral pledged to Celsius.

Celsius has introduced an institutional loan credit rating system and does indeed have credit limits. However, these regulations are not always followed, and many loans greatly exceed the credit limit, for example:

· The loan provided to Tether is twice its credit limit;

· The loan provided to Three Arrows Capital is three times its credit limit;

At the beginning of 2022, Celsius deployed at least $300 million worth of ETH in Terra's Anchor protocol.

Their risk team opposed it, but they still proceeded and Celsius had deployed $900 million on Terra when it crashed.

Fortunately, they took swift action during the UST decoupling period and only lost about $30 million.

Celsius has ventured into exchange trading strategies, but it seems to be a costly business activity for them. However, due to failed cash and arbitrage trades, they suffered losses of $150 million.

In January 2022, BTC dropped from $69,000 to a low of $30,000 within two months. The former Chief Risk Officer of Celsius claimed that CEO Mashinky instructed the trading department to sell all BTC on January 23rd and 24th.

This resulted in Celsius selling approximately 6,750 BTC, and a few days later CEO Mashinky issued instructions via Whatsapp to repurchase 3,750 BTC.

Celsius's strategy is not to engage in directional trading, but it is said that Mashinky bypassed this strategy, including bypassing the finance and risk leadership, and directly instructed the trading department to sell (at the bottom) until a few days later it bought back at a higher price.

In addition, the staff of Celsius clearly paid close attention to Mashinky's remarks during the on-site performance. The situation became very bad, to the point where several Celsius employees were tasked with deleting all traces of these remarks from the internet.

Celsius spent over $350 million to purchase CEL from the secondary market, sometimes even without enough funds to do so (hint: you are the profit).

Meanwhile, the CEO and other executives sold a large amount of their personal holdings of CEL tokens.

I am not a lawyer, and the above content is my interpretation of the current situation of Celsius. Due to reading thousands of pages and a large amount of documents in the past few days, there may be some errors or misunderstandings.

I welcome anyone who has been following the Celsius bankruptcy case to correct me if I'm wrong, or leave a comment and tell me why I shouldn't be bullish on ETH.