Celsius Network Slashes 25% of its Workforce amid Potential Insolvency
Brian Njuguna Jul 05, 2022 03:25
Celsius Network’s woes continue to deepen because the crypto lending company has reduced its workforce by 150 employees, including those based in Israel.
Celsius Network’s woes continue to deepen because the crypto lending company has reduced its workforce by 150 employees, including those based in Israel, according to media outlet CTech.
The American-Israeli company let go a quarter of its workforce just a few weeks after it halted withdrawals, citing extreme market conditions, which resulted in rumours of insolvency.
Nevertheless, Celsius has hired restructuring lawyers and consultants to solve its financial woes. The firm noted:
“We are focused and working as quickly as we can to stabilize liquidity and operations, in order to be positioned to share more information with the community. We are operating with the entire community and all clients in mind as we work through these challenging times.”
Celsius raised $750 million in funding in late 2021, pushing its valuation to $3 billion.
Founded in 2017, the firm gave interest-bearing products to cryptocurrency owners who deposited their funds, with returns going as high as 18.6% annually. In turn, the firm would lend out cryptocurrencies to gain profits.
Did Celsius bite off more than it could chew?
A recent Wall Street Journal (WSJ) report disclosed that Celsius took more risk than it could handle because it had a total asset base of $19 billion. In contrast, its equity contribution was pegged at just $1 billion.
As a result, the WSJ made the analogy that the company’s Asset-to-Equity ratio was more than double the average for all the North American banks in the S&P 1500 Composite index, which is close to 9:1.
These factors might have contributed to crypto exchange FTX shelving its acquisition of the company. FTX recently revealed that it turned down bailing out the embattled crypto lending platform because its situation was difficult to solve.
Moreover, the crypto exchange poked a “$2 billion hole” in Celsius’ balance sheet.
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