Celsius Announces 'Freeze' on Withdrawing Funds

Celsius Exchange announced Sunday that it was prohibiting users from moving their funds away from the platform until further notice, saying it was “necessary” for “our entire community.”

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

The move came as bitcoin led a market-wide crash, plummeting below $26,000. Many observers expect it to fall to $20,000 as early as this week. In addition to temporarily seizing customers’ funds, Celsius said customers would also be prohibited from trading.

“Acting in the interest of our community is our top priority,” the company added. “In service of that commitment and to adhere to our risk management framework, we have activated a clause in our Terms of Use that will allow for this process to take place. Celsius has valuable assets and we are working diligently to meet our obligations. We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets.”

In exchange for staking Ethereum, Celsius provides users with stETH, which allows them to reallocate the value of their Ethereum in staking on the platform. But as little as 29 percent of the company’s stETH is liquid — contributing to Celsius’ inability to compensate investors in the event they called the liquidity bluff.

Personally don’t have any funds on Celsius. Quite often where there is smoke, there is fire. After seeing some of these events unfold w/ them recently among others If I had funds there, I would be taking them off to self custody. Just me 2c, but do as you please. Not worth risk

— Pentoshi 🔺Flightless Bird (@Pentosh1) June 10, 2022

Research firm Nansen also pegged Celsius as one of seven major entities that contributed to last month’s meltdown of Terraform’s USDT stablecoin, contributing to skepticism of the company. The price of its Celsius (CEL) token had fallen to 42 cents as of Sunday evening, down from an all-time high of $8.05 established last year, but fell more than 50 percent in the hour after the company announced it was seizing user funds, to 17 cents.

The developments came after observers spent days warning that the platform appeared to be buckling under the strain of skeptical users withdrawing their funds. “Personally don’t have any funds on Celsius,” Twitter’s Pentoshi noted on Friday evening. “Quite often where there is smoke, there is fire. After seeing some of these events unfold w/ them recently among others If I had funds there, I would be taking them off to self custody. Just me 2c, but do as you please. Not worth risk.”

“We understand that this news is difficult, but we believe that our decision to pause withdrawals, Swap, and transfers between accounts is the most responsible action we can take to protect our community,” Celsius added in its announcement. “We are working with a singular focus: to protect and preserve assets to meet our obligations to customers. Our ultimate objective is stabilizing liquidity and restoring withdrawals, Swap, and transfers between accounts as quickly as possible. There is a lot of work ahead as we consider various options, this process will take time, and there may be delays.”

The company reported holding $25 billion in assets under management in 2021, but has refused to disclose the figure this year. It’s headed by CEO and founder Alex Mashinsky, a former CEO of Novatel.

What in the Bear Stearns meets Robinhood meets crypto is going on here https://t.co/HkgDZ8kMPc

— litquidity (@litcapital) June 13, 2022

BlockFi CEO Zac Prince, whose platform serves competes with Celsius in the arena of high-interest offerings, took the opportunity to strike a contrast between the two companies. “All products and services at BlockFi continue to operate normally, including loans, interest earning, trading, credit card and deposits / withdrawals,” Prince wrote in a message on Twitter. “We have zero stETH exposure.

“Our risk management systems are operating normally,” he added. “We take no pleasure in cryptocurrency businesses struggling but will continue to operate with the upmost responsibility towards our clients and other stakeholders.”

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