A mysterious Celsius Network debtor referenced in the crypto lender’s bankruptcy filings is EquitiesFirst, a specialty finance firm best known for lending money to executives secured by their stocks.
Celsius chief executive Alex Mashinsky said in a court filing on Thursday that his company owed $439 million to a “private lending platform” that he did not identify. Two people familiar with the matter said the platform was EquitiesFirst.
Money owed by Indianapolis-based EquitiesFirst is a significant portion of Celsius’ assets that hundreds of thousands of its customers will rely on to recover at least some of their savings.
Mashinsky, in its bankruptcy court filing, said Celsius had liabilities of $5.5 billion — the vast majority of which are owed to users — against which it had assets of just $4.3 billion.
“EquitiesFirst is in ongoing discussions with our client and both parties have agreed to extend our obligations,” EquitiesFirst said. Celsius did not respond to a request for comment.
The court filing said the $439 million debt owed by EquitiesFirst, which is not named in the document, originally stemmed from agreements in which Celsius was the borrower.
Celsius began borrowing from EquitiesFirst in 2019 on a secured basis to “support its operations”, according to the filing. Mashinsky said there was a “lack of institutional loans available to cryptocurrency companies” at the time.
In July 2021, Celsius sought to repay one of its loans and recover the collateral it had given as collateral, the filing said, but “he was first informed that the lender was not in able to return the company’s warranty in a timely manner.”
As a result, Celsius moved from borrower status to $509 million on an unsecured basis from EquitiesFirst. Loans secured by cryptocurrency are often over-collateralized, meaning that more crypto is pledged as collateral than the amount borrowed.
The debt has been slowly repaid since September last year. Current repayments are $5 million per month. The $439 million outstanding is made up of $361 million in cash and 3,765 bitcoins, according to the filing.
Celsius in late 2021 raised $600 million in equity in a deal led by investment firm WestCap and Canada’s second-largest pension fund, Caisse de depot et placement du Quebec. The deal valued Celsius at $3 billion.
The EquitiesFirst debt, which Celsius and Mashinsky previously did not disclose, provides context for the struggles faced by the crypto lender this year as crypto markets crashed.
Celsius froze customer withdrawals last month after suffering a run on its deposits and filed for bankruptcy protection earlier this week.
EquitiesFirst was founded in 2002 by Alexander Christy, who still runs the business today. It specializes in loans secured by company shares.
In an April interview with trade publication Hubbis, the company’s managing director in Singapore said that EquitiesFirst began lending against crypto around 2016.
“We were pure equities, until about six years ago we also started offering loans against cryptocurrency, and that business has really taken off in the last year or two,” said the general director.
According to the interview, EquitiesFirst’s loans in the crypto space were typically at a 60% loan-to-value ratio, collateralized against cryptocurrencies like bitcoin and ether.
An EquitiesFirst attorney joined another U.S. crypto bankruptcy case on Tuesday, that of bankrupt hedge fund Three Arrows Capital. The record indicated that EquitiesFirst was a creditor. A few hours later, the lawyer asked to withdraw.