A mysterious debtor to Celsius Network referenced in the crypto lender’s Bankruptcy filings is EquitiesFirst, a specialist finance company best known for lending cash to executives Secured against their stock holdings.
Celsius chief executive Alex Mashinsky on Thursday said in a court filing his company was owed $439mn by a “private lending platform” that he did not identify. Two people familiar with the matter said the platform was EquitiesFirst.
The money owed by Indianapolis-based EquitiesFirst forms a significant chunk of Celsius’s assets that hundreds of thousands of its customers will be relying on to recover at least some of their savings.
Mashinsky in his filing to the Bankruptcy court said that Celsius had liabilities of $5.5bn — the vast majority of which is owed to users — against which it had assets of just $4.3bn.
“EquitiesFirst is in ongoing conversation with our client and both parties have agreed to extend our obligations,” said EquitiesFirst. Celsius did not respond to a request for comment.
The court filing said the $439mn debt owed by EquitiesFirst, which is not named in the document, had arisen initially from deals in which Celsius was the borrower.
Celsius began borrowing from EquitiesFirst in 2019 on a Secured basis to “support its operations”, according to the filing. Mashinsky said there was a “lack of institutional lending available to cryptocurrency companies” at the time.
In July 2021, Celsius sought to repay one of its loans and retrieve the Collateral it had pledged as security, the filing said, but “it was informed for the first time that the lender was unable to return the Company’s Collateral on a timely basis. ”
As a result, Celsius Flipped from being a borrower to being owed $509mn on an unsecured basis by EquitiesFirst. Cryptocurrency-secured loans are often overcollateralised, meaning a greater value of crypto is pledged as collateral than the amount that is borrowed.
The debt has been slowly paid down since September last year. Current repayments are running at $5mn a month. The $439mn outstanding is made up of $361mn of cash and 3,765 bitcoin, the filing said.
Celsius in late 2021 raised $600mn in equity funding in a deal led by investment firm WestCap and Canada’s second largest pension fund, Caisse de dépôt et placement du Québec. The deal valued Celsius at $3bn.
The EquitiesFirst debt, which Celsius and Mashinsky had not disclosed before now, provides context to the difficulties the crypto lender faced this year as crypto markets crashed.
Celsius froze customer withdrawals last month after suffering a run on its deposits and filed for bankruptcy protection earlier this week.
EquitiesFirst was founded in 2002 by Alexander Christy, who still leads the business today. It specializes in loans secured against company stock.
In an April interview with trade publication Hubbis, the company’s Singapore managing director said EquitiesFirst had begun lending against crypto around 2016.
“We used to be pure equities, until some six years ago, we started to offer loans against cryptocurrency as well, and that activity has really taken off on the past year or two,” the managing director said.
EquitiesFirst’s lending in the crypto space was typically at a 60 per cent loan-to-value, secured against cryptocurrencies like Bitcoin and ether, according to the interview.
A lawyer for EquitiesFirst on Tuesday joined a separate US crypto Bankruptcy case, that of failed hedge fund Three Arrows Capital. The filing said EquitiesFirst was a creditor. Hours later, the lawyer filed to withdraw.