Recent reports revealed that the risks are now twice for the not-so-top U.S. banks with the crypto lender into action. This contradicts the claims made by CEO Alex Mashinsky, Celsius that Celsius was “not taking a tremendous risk”.
Furthermore, as per the Celsius investor documents, the crypto lender was almost doubled when it comes to being leveraged as compared with older U.S. banks.
From similar sources, it was revealed that the crypto lender indulged in new funds after it had nearly $19 billion in assets and $1 billion in equity last year. This means its assets-to-equity was 19:1. This parameter is taken by the authorities as a standard risk indicator. The same ratio for traditional U.S. banks is about 9:1, showing that the crypto lender was doubled in terms of being levered than regular banking services when the survey was done.
It was also seen that Celsius sold undercollateralized loans, making trade borrowers post about 50% collateral for their loans. Later, Celsius then utilized this collateral to own some more money. This news was quite contrasting to what CEO Alex Mashinsky had made us believe with his declarations about the firm not being associated with any undercollateralized loans. He also professed that Celsius took much lesser risk than others simultaneously lending much higher outcomes to its customers.
There were several instances to prove the same. When in November 2021 debate, to answer the Bitcoin skeptic Peter Schiff’s question, about Celsius generating higher yields not without risks, Mashinsky told that, “We’re not taking a tremendous risk.” Later, on June 13, Celsius paused all customer withdrawals, swaps, and transactions, referring to ‘extreme market conditions.’
The decision to stop transfers to conserve its consumers has still not been uplifted, and the company has been hiring technical experts to get suggestions on a might be bankruptcy condition. Until now with its liquidity problems, Celsius was one of the topmost crypto lenders, authorizing over $20 billion in assets.
Gargi Sinha is working as Senior Journalist at Confea. She has completed her Masters in Journalism from Delhi University. She has interest in crypto and blockchain technology.