Rapture #225: Lawsuit Against Celsius and Blockchain.com hit by 3AC Debacle
More and more news continues to come out regarding the fall of 3AC and Celsius. Yet another major lending company took a big hit because of 3AC bad debt exposure and a past employee of Celsius is suing the company, claiming that they were actually operating a ponzi like scheme. The lawsuit really centers around the plaintiff being owed millions of dollars, so there is obviously bias. Still, the accusations are salacious to say the least.
Let's dive into each item.
Blockchain.com takes $270 million loss on loans to 3AC
Genesis, Voyager, Deribit, and now Blockchain.com are the culprits of 3AC's blow up. While Blockchain.com is pursuing recuperation of the $270 million they lent to 3AC in the BVI liquidation, the chances that Blockchain.com is able to recover the capital are small.
In the four years that 3AC did business with Blockchain.com, the fund had borrowed and repaid over $700 million worth of cryptocurrency, which gave Blockchain.com some level of trust in the fund. Peter Smith, the CEO of Blockchain.com, assured shareholders that the company remains liquid and solvent. According to Smith, customers of Blockchain.com will not be impacted by the loss.
The news regarding Blockchain.com only came out in the past couple days. Previously, I had thought we were just about done with the news cycle for companies affected by the 3AC debacle. While SBF has said in interviews that all the shoes have dropped already, and he is in a much better position than me to know, maybe there will be more news coming out about other firms that have been affected.
Founder of KeyFi sues Celsius
Jason Stone, a previous handshake based partner of Celsius and Founder of KeyFi, filed a lawsuit last week against Celsius. If you are interested in reading a Twitter thread outlining some of the accusations made in the filing, you can find one here.
Stone in this lawsuit accuses Celsius of using customer deposits to manipulate crypto-asset markets. Specifically, Stone states that Celsius used customer bitcoin deposits to inflate the company's own token, CEL.
Celsius would then allegedly borrow against their large CEL treasury and use that capital to pay off the interest for users' deposited assets.
Additionally, Stone alleges that Celsius CEO Alex Mashinsky used wallets associated with the 0xb1 wallet, which is the wallet Stone utilized when dealing with Celsius, for his own personal benefit. For example, Stone alleges that Mashinsky transferred valuable NFTs from the 0xb1 accounts to his wife's wallet.
Clearly, Celsius had a pretty crazy corporate culture. Note that Jessica Khater is a friend of mine, so I think that piece of their corporate cultural history is kosher.
Takeaway
Many of the major centralized institutions in crypto, who were the faces of the last bull run and supposed to be the companies eventually bridging Wall Street to the industry, have egg on their face or are facing accusations of outright fraudulent activity.
The more these accusations pile up, the more the wild west reputation crypto has is proven to be true.
We have a long way to go before this asset class reaches anywhere close to maturity.
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