Celsius Calls on Citigroup for Options After Liquidity Squeeze, Report Says

The traditional bank has been hired in an advisory role to lay out potential financing options for Celsius


Citigroup headquarters in New York; Source: Shutterstock


key takeaways

  • Citigroup will also advise on offers, including Nexo’s bid to buy some of Celsius’ assets
  • Abrupt user withdrawals echo the Mt. Gox meltdown in 2014, a crypto exec told Blockworks

After freezing user accounts on Sunday, Celsius has recruited Citigroup to advise the crypto lender on its next steps.

Celsius has brought on the bank in an advisory role, The Block reported on Wednesday. While Citigroup won’t directly provide any funds to Celsius, it will lay out possible financing routes, the report said.

In addition to its advisory role, Citigroup will reportedly help Celsius evaluate offers, including one made by rival lender Nexo, which formally approached its competitor to buy some of its distressed assets, at the time Celsius signaled liquidity issues. 

Nexo told Blockworks it was aware Celsius had trouble with its withdrawal obligations and its findings pointed to the “unsustainability” of its business, even before the lender publicly admitted to it.

Celsius’ move to pause user withdrawals and transfers due to “extreme market conditions” triggered a fearful crypto market sell-off reminiscent of Mt. Gox’s catastrophic bankruptcy in 2014, said Youwei Yang, director of financial analytics at StoneX. At the time, the Tokyo-based crypto exchange lost about 850,000 bitcoin in a hack, leading to the firm’s collapse.

In a report Wednesday, crypto research firm Kaiko said Celsius suffered from a combination of poor risk management, bearish market conditions, and overexposure to stETH (staked ether, a derivative of ether locked in the Ethereum Beacon Chain), which drove the firm into a “Lehman-esque” position.

“Even if they do survive this onslaught, I don’t see how anyone can trust the likes of Celsius to keep their assets safe going forward,” Conor Ryder, research analyst at Kaiko, wrote.

Citigroup declined to comment, while Celsius didn’t respond to a request for comment by Blockworks. On Wednesday, Celsius CEO Alex Mashinsky did post a brief note on Twitter — his first since his company suspended withdrawals — thanking the Celsius community for their patience.

Citigroup’s appointment wouldn’t be a new one for the crypto lender. The bank reportedly advised Celsius on taking its bitcoin mining subsidiary business public. In May, the network submitted a confidential S-1 draft registration for the subsidiary’s initial public offering — expected to become effective after the SEC’s review.

Prospects for reorganization

Celsius has also tapped Washington, DC-based law firm Akin Gump Strauss Hauer & Feld to explore potential financing options from investors, the Wall Street Journal reported.

Dane Lund of DeFi Alliance sees that as a move to head off potential small claims court actions from its customers, which would become impossible if the company files for bankruptcy protection.

Loading Tweet..

The chaos triggered by Celsius is proof that not all lending platforms are equal, according to Mauricio Di Bartolomeo, cofounder of Canada-based crypto lender Ledn.

Clients will be further incentivized to ask the right questions to gain more information on how the yield they are paid is generated, he told Blockworks. “If they are not satisfied with the answers they receive, they could proactively choose to withdraw their assets or close their loans at that particular platform,” he added.

When asked how sustainable companies in the crypto lending space are, Bartolomeo said the models used to generate yield by each vary widely, and it would be unfair to characterize them under the same umbrella.

“There are significant differences in the risk management policies and in the yield generation strategies being employed by the various lenders,” he said.

“Those lenders who took significant risks [such as] generating yield in DeFi with their depositors’ assets, lending uncollateralized to low credit quality borrowers, taking directional market risk with client assets may be finding themselves in some trouble now,” he added.

Get the day’s top crypto news and insights delivered to your email every evening. Subscribe to Blockworks’ free newsletter now.

Want alpha sent directly to your inbox? Get degen trade ideas, governance updates, token performance, can’t-miss tweets and more from Blockworks Research’s Daily Debrief.

Can’t wait? Get our news the fastest way possible. Join us on Telegram and follow us on Google News.


upcoming event

MON - WED, MARCH 18 - 20, 2024

Digital Asset Summit (DAS) is returning March 2024. This year’s event will be held in our nation’s capital, where industry leaders, policymakers, and institutional experts will come together to discuss the latest developments and challenges in the ever-evolving world of cryptocurrency. […]

upcoming event

MON - WED, SEPT. 11 - 13, 2023

2022 was a meme.Skeptics danced, believers believed.Eventually, newcomers turned away, drained of liquidity and hope.Now, the tide is shifting and it’s time to rebuild. Permissionless II is the brainchild of Blockworks and Bankless. It’s not just a conference, but a call […]

recent research

Sequencers: The Key to The Rollup Investment Thesis


Sequencers are one of the most explicit mechanisms in crypto for creating sustainable DAO-controlled revenue.



Blockchain investigators can quickly hone in on useful data thanks to new filters


A rough start to Tuesday for Coinbase — its stock tanked during premarket hours in response to a sweeping SEC lawsuit


The SEC takes on the two biggest players in crypto within 24 hours


The SEC just sued Binance over alleged securities violations — now, the agency is coming for top US crypto exchange Coinbase


Binance’s ability to handle large outflows is once again tested as the market reckons with a fresh set of SEC allegations


Cboe Digital has CFTC permission to provide clearing services for margin trade on crypto futures at a time when regulators are closing in