READ: Alex Mashinsky's Declaration on Celsius Bankruptcy

Disgraced crypto lender Celsius Network CEO Alex Mashinsky on Thursday filed a declaration on his company’s bankruptcy, detailing its financial plight and attributing its trouble, in part, to a “relatively minor” $15.8 million loss during the collapse of the TerraForm Labs ecosystem.

In a 61-page statement filed with the U.S. Bankruptcy Court for the Southern District of New York, Mashinsky called Celsius “a young company in a novel and developing industry, that experienced rapid growth and popularity” between 2020-21. “During its growth, the company suffered a series of losses that impacted its ability to match its assets and liability.”

“In particular, despite the company’s directive to engage in only market neutral exchange deployments, certain asset deployment decisions were made in the midst of its unexpected asset growth that in hindsight proved problematic,” Mashinsky said. “Although the company took the necessary steps to ‘unwind’ these deployments, unfortunately, the damage was done.”

He said losses included $15.8 million from investments in TerraForm’s LUNA cryptocurrency and its stablecoin, Terra USD (UST), along with $40.6 million in loans to bankrupt investment firm Three Arrows Capital. He also said that it lost 35,000 Ethereum tokens in 2021 due to an incident involving a staking provider that “misplaced” the keys to its tokens.

“Celsius suffered other unanticipated losses to the business,” Mashinsky noted. “For example, in June 2021, StakeHound, an Eth2 staking service provider, announced that it had misplaced the ‘keys’ to over 38,000 Ethereum tokens, including 35,000 of the company’s Ether, due to an alleged error by StakeHound’s third-party crypto custody provider Fireblocks. StakeHound is currently engaged in legal proceedings with Fireblocks.”

For the first time, Mashinsky also disclosed the value of customer holdings affected by the company’s “freeze” on assets, referring to those customers as participants in Celsius’ “custody service.” The company announced on June 12 that it was freezing withdrawals amid a rapid fall in cryptocurrency prices.

“Approximately 58,000 users were utilizing the custody service, with digital assets worth a market value of approximately $180 million, as of July 10, 2022, held by Celsius,” Mashinsky said.

The company filed for Chapter 11 on bankruptcy on Wednesday, a month after imposing the freeze. Mashinsky said Thursday the company was unable to pay an outstanding total of $1.2 billion in debt.

You can read Mashinsky’s full statement embedded above. You can read the company’s initial bankruptcy filing by clicking here.