Celsius Lost $390M In Client Funds From Leveraged Trading

Celsius lost $390 million in client funds from leveraged trading according to the reports by Arkham Intelligence which also suggests that the company profited on the spread between the returns and the interest it pays the users so let’s read more today in our latest Cryptocurrency news.

The troubled lending company Celsius lost the funds and it used its customers’ funds worth 4534 million to execute high-risk leveraged trading via a third-party asset manager according to the reports by blockchain analytics company Arkham Intelligence. The report shows that the strategies resulted in an apparent loss of $390 million when the asset manager returned capital which corresponded to $210 million at current prices. The crypto assets may be a part of the Celsius liabilities to the customers. The report said that they identified the asset manager as the team behind the company KeyFi led by Jason Stone as one of the individuals associated with the yield farming account dubbed 0xb1.

Hi all! I’m Jason Stone, and from August 2020 until April 2021, I led the group of talented individuals who managed the 0xb1 address.

— 0xb1 (@0x_b1) July 7, 2022

This account confirmed his identity on Twitter and announced a possible lawsuit against the company. According to Arkham, Celsius sent 0xb1 $534 million of crypto assets spread out in 260 transactions from $1000 to $28 million. The user invested these funds into defi activities like liquidity providers and lending and borrowing on compound and aave. 0xb1 purchased a selection of NFTS worth $6.3 million which included Beeple’s art and CryptoPunks. The report cited a Chainalysis audit published back in 2020 which confirmed that Celsius had $3.3 billion in assets under management.

Assuming that the audits are correct, the user had over 10% of the Celsius assets under management in 2020 and Arkham added that in the five months after the audit, Celsius sent 0xb1 another $180 million of their customers’ crypto assets. The report added that 0xb1 seems to have returned $1.13 billion of the assets to the lender between February and May 2021 which corresponds to a 111% profit. This could appear to be an exceptional return on the investment but it is not as nearly as impressive when denominating the 0xb1 performance in the crypto assets that it got from Celsius rather than in the US dollars.

The report pointed to the general performance of the market and noted that the price of BTC rallied from $11,000 to $60,000 in a period of time, posting gains of 400%. at the same time, Ethereum described as another major asset Celsius entrusted with 0xb1, surged by 900%:

“More plainly, had Celsius held these assets instead of sending them to 0xb1, their value would have been $1.52 billion – close to $400 million more than what 0xb1 appears to have returned.”

Elaborating on the Celsius decision to entrust these funds to a third party, Arkham said that the New York company sent the user deposited assets that they accumulated interest. As a result of the relationship, Celsius could have ended up short on the customers’ deposited assets.