The latest court documents from Celsius Network painted grim predictions for the crippled crypto lender. The documents revealed that the actual debt currently stood at $2.85 billion, compared to a $1.2 billion deficit.
The company is expected to run out of cash by October, according to the filing with the United States Bankruptcy Court for the Southern District of New York. By then, Celsius would reach negative liquidity of around $34 million.
The Celsius crisis is getting worse
In addition to a sharp decline in cash, the three-month cash flow projected that Celsius would see an almost 80% drop in cash funds from August to September. For the next three months, the company’s operating and other expenses, such as its restructuring efforts, are estimated to be around $137 million.
The New Jersey-based company filed for Chapter 11 protection on July 13, posting a $1.19 billion deficit on its balance sheet. Celsius, along with a host of other crypto lending platforms, have come under fire following a sharp selloff in the crypto market triggered by the collapse of major tokens TerraUSD (UST) and Luna in May. .
But Celsius’ ambitious expansion plans in the crypto-mining space may not stop anytime soon. In fact, United States (US) Bankruptcy Judge Martin Glenn even approved the development of a new Bitcoin mining facility.
However, the construction of a new building would require the use of existing funds, which could reach $3.7 million. An additional $1.5 million was also approved by the judge to be deployed on an issue related to customs and duties on imported Bitcoin mining rigs.
Mashinsky’s alleged clashes
In the months leading up to Celsius’ collapse, its CEO Alex Mashinsky allegedly influenced business decisions, according to Finance Times. The executive, who had claimed banks had repeatedly abused their power, reportedly took over the platform’s trading strategy in January 2022, just before the Fed meeting.
Sources familiar with FT claimed that Mashinsky was concerned about a potential drop in crypto prices if the Fed raises interest rates.
It was then that the CEO fired senior traders from his platforms. He even ordered Celsius’ trading team to dispose of hundreds of millions of dollars worth of Bitcoin, which the company had to buy back the next day at a loss. In January alone, Celsius lost $50 million via trading.
Mashinsky also reportedly had multiple fallouts with former Celsius chief investment officer Frank van Etten regarding business decisions and his influence on business strategy. Shortly after, Van Etten came out.
It looks like Celsius’ legal troubles are far from over. On August 8, the California Department of Financial Protection and Innovation (DFPI) issued a discontinuance and desist order to prevent the platform from engaging in the sale and marketing of securities in the state. Authorities also accused the lender of offering unregistered digital securities to investors and alleged that Mashinsky made “materially” misleading statements.
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