Celsius made the disclosure as it sought US bankruptcy protection this week after client funds were frozen in June, making it the latest victim of a crash in crypto markets that forced two other major firms into bankruptcy recently. Mashinsky, who founded Celsius in 2017, revealed the scale of the New Jersey-based company’s problems in a 61-page court filing on Thursday. It showed liabilities of $5.5 billion and assets of just $4.3 billion. The vast majority of liabilities, $4.7 billion, were attributed to Celsius users. The filing suggested they could face significant losses and blamed the company’s problems on a mix of bad bets, market conditions and an inability to manage its rapid growth. “The amount of digital assets [Celsius’s] The platform grew faster than the company was ready to develop. As a result, the company made what, in retrospect, turned out to be some poor asset development decisions,” Mashinsky wrote in the filing. Celsius was one of the few crypto lenders to raise billions of dollars worth of assets from ordinary investors in recent years. It promised interest rates of up to 18 percent on some cryptocurrencies. Canada’s second-largest pension fund, Caisse de dépôt et placement du Québec, and investment firm WestCap led a $600 million equity financing round last year that valued Celsius at $3 billion. The lender is the third major crypto firm to file for bankruptcy, following crypto broker Voyager Digital and hedge fund Three Arrows Capital. All three have been hit by collapsing crypto asset prices and freezing credit in the market. Mashinsky admitted a series of mistakes that resulted in losses and detailed investments that had left Celsius unable to return money to customers as it suffered a banking collapse this year. One was a $510 million loss discovered in 2021 when Celsius tried to recover collateral it had pledged to cover borrowing from an unnamed “private lending platform.” “The lender was unable to repay the . . . collateral on a timely basis,” Mashinsky wrote. About $440 million of that remains outstanding, he added. Celsius also suffered losses of nearly $100 million when collateral pledged to secure a loan from Tether — the stablecoin issuer that is an equity investor in Celsius — liquidated by mutual agreement in recent months.

Mashinsky said about $1 billion of Celcius’ funds were illiquid, having been tied up in the company’s bitcoin mining operation or invested in an unreleased version of the Ethereum network. He suggested that Celsius’ recovery plan could include using bitcoins generated from its mining operations to “address the current cryptocurrency deficit.” As well as admitting the firm’s mistakes, it blamed “misinformation” in the media and social media for encouraging clients to withdraw about $1 billion worth of funds over five days in May. Mashinsky said Celsius was on its way to overcoming its problems when the market turned this year. “The company believes it likely would have succeeded in the near term if the market had remained relatively stable.”