Celsius Suspends Withdrawals Amid ‘Extreme Market Conditions’

As cryptocurrencies plunged drastically over the weekend, Celsius, one of the world’s most prominent crypto lending platforms, suspended all transactions and withdrawals across its network, safeguarding about $12 billion in consumer assets.

“Due to extreme market conditions, today we are announcing that Celsius is pausing all withdrawals, Swap, and transfers between accounts. We are taking this action today to put Celsius in a better position to honor, over time, its withdrawal obligations” Celsius said in a post on its website on Sunday.

Since Friday, the two largest cryptocurrencies, Bitcoin and Ether, have lost 14% and 25%, respectively, while the entire industry’s market capitalization has dropped by $167 billion. Celsius’s own coin, CEL, fell to about $0.20 after losing 20% of its value on Friday and 67 percent over the weekend.

The Florida-based company claims to serve over 1.7 million customers, making it one of the largest crypto lenders. Celsius was valued at $3.25 billion in November following a $750 million financing round led by Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec.

Capital invested on Celsius’s platform is used to fund its own investments as well as to repay loans given to other customers. Celsius rewards customers by offering up to 30% interest every week. However, the recent market disaster has limited the potential returns Celsius can obtain on its assets, threatening the liquidity of its business model.

According to the Financial Times, the value of assets deposited on Celsius’s platform decreased by half between December and May, from $24 billion to $12 billion.

Analysts feel that Do Kwan’s Terra blockchain disaster last month, in which the network’s stablecoin, UST, dissociated from the dollar and prompted a $60 billion catastrophe in its sister cryptocurrency, Luna, has stunted investor trust in the bigger market.

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The founder of Celsius, Alex Mashinsky, recently turned to Twitter to allay concerns that the Luna wipeout would jeopardize the crypto lender’s operations, informing users that Celsius had “minimal exposure” to Luna and UST, and dismissing contrary reports as “rumors” spread by competing services.

Mashinsky also dismissed reports that Celsius had a liquidity problem one day before the platform announced its service suspension on Twitter, dismissing the concerns as “FUD,” or “fear, uncertainty, and doubt,” a word crypto traders frequently use to reject criticism. But Celsius’s cash flow problems are simply the latest in a long line of problems for the company.

The company’s chief financial officer, Yaron Shalem, was jailed in Israel in November in connection with a probable crypto fraud case at Shalem’s previous workplace, where he also worked as CFO. Celsius takes over for Shalem in February. Shalem’s lawyers claim that the former CFO “acted in accordance with the law and strong and utterly rejects any attempt to associate him with any act of fraud.”

Following “discussions” with securities regulators, Celsius in April restricted investing in its high-interest Earn product to institutional investors only in the United States, and amended its risk disclosures to highlight that its high-yield products posed “regulatory risk.”