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According to a recent analysis by blockchain analytics firm Arkham Intelligence, the failed crypto loan company Celsius reportedly utilized $534 million in client cash to execute "high-risk leveraged crypto trading methods" via a third-party asset manager.
According to the research, which employs on-chain analytics, these techniques "resulted in apparent losses of $350 million when the asset manager returned capital," or $210 million at current prices. These crypto-assets may be part of Celsius's client obligations.
Arkham stated that it had identified the asset manager as the company behind the investment business KeyFi, fronted by CEO Jason Stone, a person involved with yield farming account 0xb1.
Yesterday, 0xb1 disclosed his name in a Twitter thread announcing his lawsuit against the loan company.
According to Arkham, between August 2020 and April 2021, Celsius transferred $534 million worth of cryptocurrencies in 260 transactions ranging in value from $1,000 to $28 million. In turn, 0xb1 invested these assets in various DeFi yield-generating activities, such as providing liquidity on decentralized exchanges (DEX) and lending and borrowing on Compound and Aave.
0xb1 acquired a variety of NFTs valued at $6,300,000, including CryptoPunks, Beeple art, and other ventures. The claim mentions a December 2020 Chainalysis audit that revealed Celsius had $3.3 billion in assets under control.
By that day, the company had already transferred $365 million to 0xb1.
“Assuming Chainalysis’ audit is correct, 0xb1 had over 10% of all Celsius’ assets under management in late 2020,” claimed Arkham, adding that in the five months following the audit, Celsius paid 0xb1 an additional $180 million of their clients’ crypto assets.
According to the research, 0xb1 seems to have repaid $1.13 billion in crypto assets to the crypto lender between February and May 2021, resulting in a 111 percent profit in U.S. dollars.
Although this “may appear to be an exceptional return on Celsius’ $530 million investment,” Arkham highlighted that it is “not nearly as impressive when denominating 0xb1’s performance in the crypto assets it received from Celsius rather than in U.S. dollars.”
The paper examines the success of the crypto industry as a whole, noting that Bitcoin’s price rose from roughly $11,000 to around $60,000 throughout the analyzed time, a gain of over 400 percent.
During the same period, Ethereum, defined as “another valuable asset Celsius entrusted with 0xb1,” increased by about 900 percent, from approximately $400 to nearly $4,000.
The study states, “More plainly, had Celsius held these assets instead of sending them to 0xb1, their value would have been $1.52 billion – close to $400 million more than what 0xb1 appears to have returned.”
Arkham elaborates on Celsius’ choice to transfer business cash to a third party by stating that the New York-based company “potentially delivered 0xb1 user-deposited assets with accruing interest.”
According to the investigation, “as a result of Celsius’s connection with 0xb1, Celsius might have unwittingly fallen short of the deposited assets of its clients, much alone the interest it guaranteed them.”
In addition, Arkham stated that the lender’s business strategy was predicated on “pocketing the spread between its returns and the interest it pays its users.”
“Thus, Celsius users’ account dashboards possibly informed them that they were accumulating crypto rewards that did not exist,” the audit stated.
When reached over Telegram, Jason Stone did not immediately react to Decrypt’s request for comment.
Decrypt also contacted Celsius, who responded with an automated message stating that the business was “working to respond to the many inquiries we receive as quickly as possible” and recommended that consumers visit the company’s blog and Twitter account.
