Celsius Network Blocks Dylan LeClair for Predicting Meltdown

The Celsius Network blocked a Bitcoin Magazine staffer on Twitter over the weekend for attempting to warn customers that it was at risk of a financial meltdown.

Bitcoin Magazine’s head of market research Dylan LeClair began authoring the messages that offended the company — which seized its customers’ funds on Sunday — on May 11, in the wake of the Terraform ecosystem’s collapse. “I wouldn’t want to have any value in in a crypto yield product. I suspect we have some yet to be announced insolvencies here,” LeClair wrote in a Twitter thread. “Certainly don’t want to spread any false rumors, but Celsius (a company starving for yield) looks to be in the middle of all of this.”

LeClair noted that Celsius sent Ethereum — to the tune of $275 million — to Terraform’s Anchor Protocol between April and May, just before Terraform’s products collapsed due to its stablecoin, UST, losing its peg to the U.S. dollar. Celsius, presumably, was drawn to the high-risk protocol for its yield offering of 20 percent — slightly higher than the 17 percent Celsius needed to pay its customers. (The company sent a minimum of $535 million to the Anchor Protocol in total.)

“Would love to be proven wrong about some of these worries, but I highly doubt we have heard the end of the second & third order effects of this collapse,” LeClair added. “Not your keys, not your coins.”

He returned to the thread on June 10, two days before Celsius seized its customers’ funds, to note that the Lido Protocol’s stETH — a derivative token representing staked Ethereum — had lost its peg to ETH, trading at .95. Celsius used the product to issue tradable funds to its users in exchange for their ETH.

🫠🫠🫠 pic.twitter.com/oLEVgqAtwu

— Dylan LeClair 🟠 (@DylanLeClair_) June 13, 2022

“Celsius has found themselves in the middle of another yield harvesting trade that is turning south,” LeClair noted. “Growing risk of large losses and potential insolvency. Get your coins out of ‘HODL Mode’ and into your own custody. Not a drill.” (HODL Mode is a phrase that Celsius uses to refer to customer funds when they are prohibited from making withdrawals, a situation that can occur for several reasons.)

LeClair said he felt “obligated” to warn users because of the “potential for people to sustain large losses due to risks that they didn’t know they were taking.” Celsius’ cryptocurrency, CEL, dropped by 27 percent on Saturday as the situation unraveled. The company announced that it was seizing customers’ funds until on Sunday until further notice, saying it was “necessary” due to “extreme market conditions.” LeClair shared a photograph indicating the company had blocked him the same day.

As of Monday, the company was seeking to defend a loan it had taken out on the Maker Protocol worth $278 million. Celsius stood to lose up to $420 million in collateral in the event of liquidation, which would have occurred if bitcoin’s price reached roughly $18,300 — just $2,500 less than its lowest point on Monday. The company shelled out $30 million to repay a portion of the loan on Tuesday morning, and had brought its liquidation point down to roughly $16,800.

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