Celsius, the now defunct crypto lender and borrower, sold bitcoin and eth deposited by customers to buy Cel, its own token, the bankruptcy examiner Shoba Pillay said in a court document.
“Celsius did not earn sufficient yield on its crypto asset deployments to fully fund its CEL buybacks,” Pillay said, adding:
“As a result, it began using customer-deposited Bitcoin (BTC) and Ether (ETH) to fund its CEL purchases.
But because Celsius lacked adequate reporting systems to track and reconcile customer assets on a coin-by-coin basis, Celsius was unable to track when it was short the necessary coins to meet customer obligations.
Celsius was therefore caught off guard in early 2021 when it discovered a shortfall in BTC and ETH (which it had been using to fund CEL buybacks).
Because the prices of BTC and ETH were increasing at that time, the amount of dollars it cost Celsius to acquire the necessary number of BTC and ETH also increased.”
Celsius then used the customer’s stablecoins to buy bitcoin and eth in May at the cost of $300 million, but:
“As customers began withdrawing BTC and ETH from Celsius in May and June 2022, Celsius had to unwind its borrowings to recover the BTC and ETH it had pledged. As a result, its stablecoin deficit was replaced with a deficit in BTC and ETH.”
There has been speculation in the crypto space since the FTX collapse that some of these now bankrupt entities were selling bitcoin and eth to prop up their own tokens or invest in other assets because FTX curiously had a very low amount of bitcoin or eth.
This bankruptcy report confirms as much, at least in the case of Celsius which had a shortfall of $1 billion.
Some suggest this practice led to pressure on bitcoin’s price, and may explain why it didn’t see a blow off top.
With these entities now no longer operational, much of that subduing of bitcoin has been removed.