Celsius Network Files Chapter 11 Bankruptcy | Hacker News Reader

Celsius Network Files Chapter 11 Bankruptcy

dfr.vermont.gov

75 pointskamaraju69 comments

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Old news (July 14th)

Wow, Celsius did a presentation on the first day of the bankruptcy proceedings[1].

Quite some interesting details.

Here's an overview from that presentation.

Total Assets reduced by $17.8Bn since March 30, 2022:

  User withdrawals: $1.9Bn
  Decline in market value of holdings: $12.3Bn
  Crypto liquidated by third parties (Tether): $0.9Bn
  Crypto lost from investments: $0.1Bn
  Loans: $1.9Bn due to loan redemption and liquidation

And look at that corporate structure: https://imgur.com/a/0snAmoD I've come to realise it's typical of these new age firms to have such mind-bending structure.

[1] https://cases.stretto.com/public/x191/11749/PLEADINGS/117490...

Do we learn anything interesting about Tether through the Celsius bankruptcy? Will Celsius be forced to reveal how their relationship with Tether worked?

When you say "new age firm" I think you are implying "crypto" but any entity that is operating in multiple jurisdictions with >1B of revenue is gonna have a similar corporate set up for taxation/IP purposes.

Celsius acknowledges $1.2B hole in balance sheet - https://news.ycombinator.com/item?id=32101794 - July 2022 (327 comments)

Celsius Networks: cryptocurrency lender files for bankruptcy - https://news.ycombinator.com/item?id=32091369 - July 2022 (4 comments)

Crypto Crash Drags Lender Celsius Network into Bankruptcy - https://news.ycombinator.com/item?id=32090510 - July 2022 (8 comments)

Goldman Raising $2B to Buy Distressed Celsius Assets - https://news.ycombinator.com/item?id=31870422 - June 2022 (133 comments)

Crypto’s frozen mystery: The fate of billions in Celsius deposits - https://news.ycombinator.com/item?id=31828916 - June 2022 (5 comments)

A Note to the Celsius Community - https://news.ycombinator.com/item?id=31805129 - June 2022 (136 comments)

Crypto Lender Celsius Hires Restructuring Lawyers After Account Freeze - https://news.ycombinator.com/item?id=31747583 - June 2022 (8 comments)

Celsius Appears insolvent, and it's taking the whole crypto market with it - https://news.ycombinator.com/item?id=31734660 - June 2022 (99 comments)

Celsius Is Collapsing Here's Why - https://news.ycombinator.com/item?id=31734067 - June 2022 (8 comments)

“Celsius has the reserves to meet obligations” (June 7, 2022) - https://news.ycombinator.com/item?id=31732471 - June 2022 (7 comments)

Major crypto lender Celsius freezes withdrawals as markets tumble - https://news.ycombinator.com/item?id=31723286 - June 2022 (403 comments)

Crypto Platform Celsius Pauses Withdrawals - https://news.ycombinator.com/item?id=31720277 - June 2022 (149 comments)

I just pulled my coins out of coinbase. I know it's not the same situation, but "not your keys, not your coins" looks like good advice.

I want to do this. Can you explain how to do it please (without exchanging to USD)?

Partly depends on what coin(s) you want to hold.

Download Metamask (or any of the Wallet apps, interestingly CB has also has a Wallet app.), create your public/private keys through them. Note down the public address of the coin and transfer out from Coinbase to that public address. Make sure to transfer to the right block-chain address pair. If done incorrectly you'll permanently lose money. For example; select Ethereum as the blockchain while transferring your ETH coins.

https://trezor.io/ but if you are not able to research this on your own and rely on some random comments (and you don't already know this while already holding crypto), I'm not sure withdrawing is +EV.

I don't mean to offend you, just a sincere advice. You can lose your coins when they are on Coinbase and you can do it when you want them most, but you can lose them on your own too. Maybe at least split them.

Also don’t forget that you need to pay fees too in some cases for transfers which can make things tricky and costly. So if you have a coin B which is a subcoin of coin A, then you need A to transfer B…

Metamask, cake wallet, exodus wallet, or a hardware wallet are all suggestions I have seen. I personally used exodus wallet. Then, you can get the wallet addresses, and have coinbase send a transaction to your wallet. It was actually really easy.

Phantom wallet is pretty good too I heard. Very secure.

You'll need a soft or hard wallet, a backup method appropriate to that wallet, a safe, custodial access (some way for your family/friends/etc to get to it if you die) and you may need to run a bittorrent node.

Most soft wallets are built in electron (Metamask) and are exactly as secure as you think an electron app is.

Hardware wallets are in theory better but may be vulnerable if physically taken, and require a cold wallet which itself has to be kept securely and for extended periods of time. For $120 you can get a titanium card to store your cold wallet backup on.

And all those hard/cold wallets need physical access control, protection from fires, etc.

I did this a few months ago. I moved it to Cash app and Greenwallet, I used their apps for both.

Run the standard Bitcoin core wallet and send them from coinbase to your new wallet. It will take a while to sync up but you should be able to make the transfer almost immediately. Make sure you have plenty of free hard drive space and back up your wallet.dat file as soon as you have received the coins.

You don't have to wait for the transaction to confirm before backing up the wallet.dat. The keys in wallet.dat are the same regardless of the transactions to/from them.

Ah yes, good point!

I have no affiliation with Coinbase and have been thinking about doing the same, but doesnt Coinbase provide a solution?

https://www.coinbase.com/wallet

Nobody could have predicted that a company who paid out more than they made in interest would default.

Honestly feel like this crash didn't cut deep enough, we are due for another speculative bubble in less than 2 years IMO.

Isn't that just a classic ponzi scheme?

Not quite.

Celsius lent it's money to 3AC, and 3AC speculated with Luna/Terra.

When Luna collapsed, 3AC collapsed and now Celsius is collapsing.

It's not a Ponzi. It's a house of cards but not a Ponzi.

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Celsius was paying 18% APY, but it's loan to 3AC was probably more than 18%. And whatever 3AC gave to Luna/Terra was more than that.

If anything, this is the toxic asset problem from 2007 just being relearned by the cryptocoin community

> If anything, this is the toxic asset problem from 2007 just being relearned by the cryptocoin community

It's different this time though, with the level of institutionalization and how VC-funded (and even public) capital is directly intertwined in on-chain funds in a way we have not seen play out before.

https://en.wikipedia.org/wiki/American_Home_Mortgage

https://en.wikipedia.org/wiki/New_Century_Financial

https://en.wikipedia.org/wiki/Bear_Stearns

https://en.wikipedia.org/wiki/IndyMac

Is this not an institute that was intertwined into the 2007 crisis?

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When one bank fails, all the banks "connected" to that bank become at risk of failure. A tree that falls in a forest can knock down other trees. It becomes difficult to predict which trees can knock down other trees unless you publicly map out which trees are close to each other.

We didn't know Celsius was connected to 3AC connected to Luna/Terra until after these bankruptcy events. Are there other groups that are connected?

My bad, was a bit tired when commenting and misread it as 2017, thinking you're talking about the last crypto bubble burst. So GP was made in context of the history of digital assets markets.

> Are there other groups that are connected?

I guess we'll find out soon enough. Not sure if you count publicly known stuff like Bitfinex<>Tether, Coinbase<>Circle<>USDC, FTX<>Solana etc. Then we have initiatives like Binance Ventures and others who have gotten themselves involved all over the place as owners.

Not your keys, not your cheese

Centralised exchanges are bad, people should have used proper decentralised and secure ones like Ronin, or Wormhole, or Poly, or Harmony, or Nomad, or...

None of these are DEXes, they are mostly bridges. If you want to avoid protocol and smart contract risk, don’t deposit your tokens into third parties. Hold your own keys and trade your tokens on a DEX like Uniswap.

If you're joking: Haha

If you're serious and this is the conclusion you reached from Celsius going bankrupt: good luck!

All of the bridges I've listed were hacked or exploited just this year, for hundreds of millions each.

I got your joke and thought it was good

I wonder why they chose to declare bankruptcy in Vermont even though the first sentence clearly states "unlicensed in Vermont"?

It still appalls me that people were willing to risk granting custody to all of their crypto for a meager 8% return - absolutely wild.

Mandatory: Not your key, not your coins

True, but the market as a whole often responds to these situations.

By this logic you shouldn't put your money in a bank either.

(I'm not justifying Celsius, just saying there are plenty of 'bank' like places to store your crypto)

Well... ask a Great Depression survivor how they feel about banks. I have met many that won't put a dime in a bank.

Fifty years from now:

"Grandpa lived through the Great Crypto Frenzy. He lost all his savings in the Coinbase bankruptcy of 2023. Still doesn't trust digital money."

And the Depression was the driving force that brought about massive bank regulation (notable the 1933 Banking Act), including the FDIC which is what everyone is talking about here.

Those regulations simply don't exist (yet) for crypto. They may be coming, but as of right now if you hold crypto in an exchange, it can evaporate if the exchange goes belly up.

All of the existing regulation WILL NOT make a bit of difference if everybody wants their money out of the bank at the same time. If you have been watching the half dozen nations going through high/hyper inflation, withdrawal is the first service to be discontinued at signs of trouble.

No, but it guarantees we're insured up to $250,000. It won't disappear, we just won't be able to withdraw it immediately. That's admittedly not ideal, but it's better than losing it entirely. In the case of most/all crypto exchanges, no such protections exist. If they go under, you lose your holdings with no recourse for having them returned. This is all US-specific, of course.

FDIC insurance was added partway through the Great Depression. So yes, people lost money, but that’s because the current system didn’t exist.

Also, good luck finding someone who lived during the Great Depression and carried a bank balance at the time. They’d have to be 100+ years old!

I mean, people who had assets in banks to lose would probably be in their 20-30s at least during the 1930s. It’s hard to find many people that age now but I agree that in the 90s you could .

Ok, banks are not very good (emphasis on the word "very"). So then why does tokenbros want to replace them with a worse system?

Bank deposits are insured by law. In the US this is called FDIC and guarantees that your deposits up to $250k will be repaid whatever happens to the bank.

Which crypto exchanges can promise the same? None of them because they're not banks, even if they put up a fancy website that looks awfully bank-like to retail customers.

A crypto wallet isn't 'insured' either so this point doesn't matter.

It does. When coinbase goes bankrupt, they can liquidate all user assets. User assets at banks are insured up to 250k.

Why should I take the risk of a company going bankrupt and liquidating my funds when I can keep the money in my house (wallet)?

Because there's risk in keeping it yourself. Either you lose the keys or you get hacked and they're stolen. The insurance situation is the same either way.

It does matter: FDIC insurance protects you as a depositor specifically from counterparty risk, i.e., the risk that your bank may become insolvent and fail to honor your withdrawals. But in the crypto world, if you move your crypto off an exchange (your counterparty) and onto your private wallet, then you've eliminated your counterparty risk by eliminating your counterparty.

Obviously handling your own crypto custody in a private wallet means you're taking on a whole different set of risks. But the key feature of deposit insurance is that it mitigates a risk factor that's both 1) opaque to you, and 2) outside your ability to directly influence. And these are properties many crypto-aligned folks care about.

Diversify. Keep some on an exchange, keep some yourself. There is risk either way and neither are insured.

Sure, that seems like sensible advice for the median case. All I'm saying is that these risk baskets are qualitatively different, and therefore the correct allocation between custody strategies might be very different across different people and use cases.

The federal government guarantees the banks. No one is guaranteeing Celsius.

Fed gov doesn't guarantee your wallet if you lose it.

Crypto in Wallet is equivalent to physical cash. If you lose it (cash or wallet) no one will guarantee anything.

However, you can deposit cash in FDIC insured bank accounts. Question is what's the equivalent of a bank deposit in the crypto world?

The risk calculation is very different. Cryptocurrency is protected by passwords and keys and stuff so is secure from theft without needing a bank. But cash is not, so a bank does provide value - you're more likely to be robbed than the bank go under.

And of course, in most places, banks and other institutions are protected with rules about keeping a certain amount of cash on hand and some sort of insurance mandated by the government.

The joys of being your own bank, your own cybersecurity department, your own investment broker and several other professions. All for free now, instead of the filthy money salary. Truly revolutionary, few understand :)

I feel bad for the users that were left holding the bag. I put a good amount of money in the YC backed StableGains (Terra) just to watch it evaporate overnight. The investors and founders should feel deeply ashamed for selling these platforms as legitimate savings accounts. The fact that these platforms were backed and promoted by well know VCs/incubators, such as Y Combinator, is utterly appalling.

Ashamed? You can be pretty sure that the founders and early investors knew exactly what would happen in the (likely) event that it would crash and burn, and they safely extracted their salaries, bonuses, etc. at the peak.

And they are very unlikely to feel even the slightest remorse, because the people who pushed these too-good-to-be-true schemes are sociopaths, if not psychopaths.

> sociopaths, if not psychopaths

they are bred and selected by game rules a.k.a. "rational" actors.. look at Martin Shkreli, still listed as "American Executive" and right back in the pharm trading..

You're right. Y Combinator doesn't deserve a shred of the respect they garner. I don't know why I thought I could trust one of their portfolio companies. I assumed they did due diligence and had customers/users in mind when selecting companies to invest in.

And yet the website is still functional and apparently still taking deposits, notwithstanding the easily-ignored popup and banner saying that withdrawals are suspended.

https://celsius.network

Predictable from the beginning.

Sane setup:

1) Auto Direct deposit % of paycheck into something like Swan Bitcoin

2) Daily auto DCA using direct deposit balance

4) Weekly auto withdrawal to cold storage

Set it and forget it. Trust minimized. Sleep soundly.

Mashinsky is and always has been a huckster.

Or just use real money rather than spending an extraordinary amount of time and effort on making sure that no one can steal to your crypto tokens. This is just the latest example for why crypto is not, and never will be, useful for anything other than speculation and crime.

This setup took roughly 15 minutes to setup. Most of that time was spent in ADP.

But you have to nurse it for the rest of your life. That’s a lot more work than using a credit card or cash, or even cumbersome 1970s cheques. Or ApplePay, which is way more practical than anything else, including fund transfers and payments.

This is my first time hearing about Swan Bitcoin, really cool idea.

Are there other services just like this that will auto send to a cold wallet address but also let you buy more than BTC? (like ETH for example)

I could totally be missing one, but they're the only one I've seen with this feature. Their website is dead simple also. Something my mom could setup. Can't recommend them enough.

Funny enough I discovered them because their founder/CEO was very loudly warning people about Celsius for like a year before it happened.

RIP my $100 in USDC

Why Vermont?

> On July 13, 2022, Celsius and several of its affiliates commenced voluntary Chapter 11 bankruptcy proceedings in the U.S. Bankruptcy Court for the Southern District of New York

It's likely that the Vermont Department of Financial Regulation is posting this information as a service to Vermont residents.

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