Reports are suggesting that all may not be well at the Celsius crypto lending platform. Some customers claim they have been unfairly wiped out, while company CEO Alex Mashinsky asserts that malicious actors are trying to collapse the system.
Celsius is one of the crypto industry’s largest lenders, with $11.8 billion worth of assets. The company operates by loaning out digital assets that users have deposited while offering them high yields in interest in return. Celsius also lets investors take out loans at low rates using crypto as collateral.
This model works fine when markets are buoyant, and demand is high, but when prices tank hard and fast as they have been doing this month, the entire system becomes unstable.
Bitcoin bull Max Keiser compared the high yields on Celsius to those previously offered by DeFi platforms harnessing UST and LUNA.
The high yields on CEL are a mirage. Just 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 they operate outside the law, and the crypto crash has led to panicked customers withdrawing their funds. One former customer tweeted:
“Withdrew all funds, Cel token imploding, big warning sign. Celsius offering $50 bonus for depositing $2500 in stables is red flag. Capital preservation is more important, than return on capital.”
In a Twitter Spaces event this week, some customers confirmed that they had sold their CEL tokens and asked Mashinsky what the company was doing to support investors. Investors also complained that trading was illiquid as the token price fell, which exacerbated their losses, and the company failed to support its native token.
Mashinsky claimed that outside malefactors have decided 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.
The firm raised $400 million in a funding round in October 2021, which adds more salt to the wounds of investors.
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. Additionally, CEL has plunged more than 20% over the past week and a whopping 63% over the past fortnight as fears mount and the investor selloff accelerates.
CEL is now trading at a painful 90% decline from its June 2021 all-time high of just over $8.
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