According to reports, all is not well at Celsius crypto lending platform. Customers claim they have been unfairly eliminated, while Alex Mashinsky (CEO of Celsius) claims that malicious actors are trying the system to collapse.
Celsius is one of the crypto industry’s largest lenders, with $11.8 billion worth of assets. The company lends digital assets to users who have made deposits and pays high interest. Celsius offers investors the opportunity to borrow at very low rates with crypto collateral.
This model works when markets are buoyant and demand high. However, when prices plummet as hard and quickly as they have been this month, the whole system becomes unstable.
Max Keiser, a Bitcoin bull, compared the high yields of Celsius to those offered previously by DeFi platforms harnessing UST or LUNA.
CEL’s high yields can be a scam. Like LUNA/UST. https://t.co/22wQIYpRR4
— Max💙🇸🇻 (@maxkeiser) May 19, 2022
Terra First, Celsius Next?
On May 18, Barron’s reported that the firm has come under pressure on two fronts recently. Regulators claim that they operate outside of the law and panicked customers have pulled their funds. One former customer tweeted:
“Withdrew all funds, Cel token imploding, big warning sign. Celsius offers $50 bonus for depositing $2500 to stables. This is a red flag. Capital preservation is more important, than return on capital.”
This week at Twitter Spaces, customers confirmed that they had sold CEL tokens. Mashinsky asked them what company was doing to help investors. Investors complained that trading was not liquid as the token price fell. This exacerbated their losses and led to the company failing to support the native token.
Mashinsky stated that outside malefactors are planning to attack the firm.
“This is not a coincidence. This is somebody who decided, ‘You know what? I’m going to take down all of Celsius.’”
The report added that he “sparred with users who threatened to leave the company,” claiming that he had personally lost “hundreds of millions of dollars” in the crypto market collapse.
In October 2021, the firm raised $400 million through a round of funding. This adds salt to the investors’ wounds.
CEL Price Plunges
The platform’s native token, used as collateral for lending, has lost a further 2.4% on the day to trade at $0.815, according to CoinGecko. CEL plunged by more than 20% in the last week, and 63% in the past two weeks as investors sell off accelerates.
CEL is trading at a painful 95% decline from its June 2021 high of just over $8.