2021 Document Shows Celsius Issued Big Loans with Small Collateral

Under CEO Alex Mashinsky, Celsius Network LLC boomed to have more than $12 billion in deposits from lenders after pitching a less risky investment package with higher interest rates than the traditional banks.

However, investor documents from 2021 reviewed by the Wall Street Journal (WSJ) showed that Celsius issued numerous large crypto loans with little collateral or support in a case of mass withdrawals. Its investment portfolio comprises $19 billion of assets and roughly $1 billion of equity before it raised new funds last year. According to data from FactSet, the median assets-to-equity ratio for all the North American banks in the S&P 1500 Composite index was 9:1, about half that of Celsius.

Economist Eric Budish from the Chicago business school believes the ratio of 19-1 for an unregulated company with assets in crypto is exceptionally high. He noted that large banks often have ratios near those figures, but they hold much more stable support and have access to central bank loans for ready cash.

Celsius now fights for survival, seeking advice on a potential bankruptcy filing. Earlier it gave projections to investors that deposits would top $108 billion in 2023, and revenue would hit $6.6 billion. It forecasts a $2.7 billion profit by 2023, more than six times its 2021 profit projection.

Celsius rewarded lenders with annual yields of 18.6% on some cryptocurrencies and 7.1% on stablecoins. While banks like overcollateralized loans, Celsius requires borrowers to post only an average of 50% collateral, according to its investor documents. Celsius investments included its bitcoin-mining operation and a futures-arbitrage practice. But the falling price of bitcoin has eaten into bitcoin miners’ bottom line in recent months.