Embattled Crypto Lender Celsius Allocates $25M for Withdrawals, Burns $500M in WBTC

Celsius Network established a crypto wallet with $25 million of crypto assets for the lender’s custody account holders to withdraw, Arkham Intelligence said in a report. Eligible customers have withdrawn some $17.7 million of crypto assets, the firm’s chief executive said in a Wednesday court hearing.

AccessTimeIconMar 8, 2023 at 6:55 p.m. UTC
Updated Mar 8, 2023 at 9:04 p.m. UTC

Crypto lender Celsius Network, which is currently operating under bankruptcy protection, has established a crypto wallet with $25 million of digital assets for Celsius’ custodial account holders to withdraw, blockchain intelligence firm Arkham Intelligence said in a report.

The transferred assets were $10.39 million of USDC stablecoin, $8.8 million of ether (ETH), $4.31 million of altcoins and $1.57 million of other stablecoin, including Binance USD, DAI, Paxos dollar and Gemini USD.

On Wednesday, Celsius interim Chief Executive Chris Ferraro said in a court hearing on Wednesday morning that custody account holders had withdrawn $17.7 million of these cryptocurrencies, with another $3.5 million of withdrawals in the process. That represents 60% of eligible custody users and 80% by crypto value, he said.

Celsius was among several one of the high-profile crypto firms that collapsed last year amid crypto market turmoil. The lender halted user withdrawals in June and filed for Chapter 11 bankruptcy protection in July. A subsequent court process involved heated debate about the ownership of the assets customers deposited to the platform.

The lender said on March 2 that it opened withdrawals for select custodial account holders with certain limitations after securing approval from the U.S. bankruptcy court. Celsius was authorized to distribute 94% of each eligible user's custody assets, according to a court document.

However, Arkham reported $13.62 million of withdrawals from the $25 million of funds based on blockchain transaction data. The other $4 million in withdrawals was likely in bitcoin (BTC), an Arkham analyst told CoinDesk in a Telegram message. Arkham does not track transaction data on the Bitcoin blockchain.

Celsius' $500M wBTC maneuver

Celsius also burned some $500 million of wrapped bitcoin (wBTC) at the end of February, according to the Arkham report. A wBTC token represents one BTC on the Ethereum blockchain.

The lender sent over 20,000 of wBTC in two batches to a separate address, which then forwarded the tokens to crypto trading firm FalconX.

FalconX sent the tokens to another account, presumably owned by the Celsius liquidator or a partner. The entity then burned, in other words redeemed, the tokens for native BTC.

Celsius redeemed over $500 million of wBTC in two days via FalconX. (Arkham Intelligence)
Celsius redeemed over $500 million of wBTC in two days via FalconX. (Arkham Intelligence)

The maneuver may be part of Celsius’ plan to consolidate its crypto holdings and satisfy customer withdrawals in BTC. In August, CoinDesk reported the crypto lender was massively short of BTC holdings, owing some 105,000 BTC to customers while holding only 14,578 BTC and 23,348 wBTC on its balance sheet.

Celsius’ crypto wallets on the Ethereum blockchain hold more than $1 billion in crypto assets, according to Arkham data. This does not include holdings on other blockchains, including the recently redeemed BTC on the Bitcoin blockchain.

The lender’s largest holdings are $638 million of Lido’s staked ether derivative (stETH) and $251 million of the lender’s own CEL tokens.

Jack Schickler contributed reporting.


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Krisztian  Sandor

Krisztian Sandor is a reporter on the U.S. markets team focusing on stablecoins and institutional investment. He holds BTC and ETH.