According to reports, investors may not have the funds necessary to rescue Celsius Network from the financial difficulties that are plaguing it.
There is no investor bailout for Celsius
According to the Wall Street Journal on Thursday (June 16, 2022), anonymous sources revealed that Caisse de dépôt et placement du Québec, a Canadian fund, and growth-equity firm WestCap Group, which led Celsius Series B funding round last year that raised $75 million, may not provide more funds to help the struggling crypto lender.
Another source said that the current investors either want to wait for a Celsius purchase or a restructure. One person familiar with the talks between Celsius and its investors said, “few are feeling OK about things. There was more risk in this than fully appreciated.”
Celsius is currently insolvent and faces a liquidity crisis. This is the latest development. On-chain data showed that Celsius had large amounts of staked ether (stETH).
Celsius took ETH deposited customers and staked them via Lido on the Ethereum Beacon blockchain. In return, stETH was received. These tokens were then used by the company to generate yield through other DeFi protocols.
“Staked ETH has increasingly become decoupled from ether amid concerns over the delayed merge on Ethereum. Consequently, large holders have been dumping the coin, and this continues to dry up liquidity for any swaps from stETH back to ETH.”
Celsius will have difficulty selling its large stETH holdings in the open market. Such a situation has served to compound the firm’s liquidity crisis.
On June 13, Celsius stopped all withdrawals, swaps and transfers between accounts. According to the lender the company was forced to stop withdrawals due to the collapse of the crypto market.
Regulative Trouble is on the Horizon
In a bid to solve mounting financial problems, Celsius Network recently hired restructuring lawyers from the law firm Akin Gump Strauss Hauer & Feld LLP.
Nexo, a rival lending platform revealed that it is interested in purchasing qualifying assets from Celsius following the withdrawal suspension. The offer is open for response by the latter until June 20.
Meanwhile, amid the issues facing Celsius, reports emerged that securities regulators in Texas, Alabama, New Jersey, Kentucky, and Washington are investigating the firm’s decision to halt withdrawals.
Joseph Rotunda, the Texas State Securities Board Enforcement Director, stated:
“I am very concerned that clients – including many retail investors – may need to immediately access their assets yet are unable to withdraw from their accounts. The inability to access their investment may result in significant financial consequences”.