Arkham Intelligence suggests that Celsius also profited from “the spread between it returns and the interest its users pay.” According to a report from Arkham Intelligence, the troubled crypto lending company Celsius used customers’ funds of $534 million to implement “high-risk leveraged cryptocurrency trading strategies.”
This report uses on-chain analysis to show that these strategies resulted in “apparent losses of $390 millions when the asset manager capital returned,” which is equivalent to $210 million at current price.
According to the report, these crypto assets could be part of Celsius’ liabilities to customers.
Arkham stated that it identified the asset manager as being the team behind investment firm KeyFi. Led by CEO Jason Stone, Jason Stone is one of the people associated with the yield farming account 0xb1.
Yesterday, 0xb1 also confirmed that he was the author of a Twitter thread in which he announced a lawsuit against the lending company.
Arkham reports that Celsius sent $534 million worth of crypto assets from August 2020 to April 2021 in 260 transactions, ranging from $1,000 to $28 millions. These funds were then invested by 0xb1 in various DeFi yield-bearing activity, including providing liquidity on decentralized exchanges ( DEX), and lending and borrowing on Complement and Ave.
Also, 0xb1 reportedly bought a selection NFTs for $6.3 million. This included CryptoPunks and Beeple Art as well as several other projects.
According to the report, a Chainalysis audit was published in December 2020. It confirmed Celsius’s $3.3 billion assets under management.
The firm had already transferred $365 million to 0xb1.
Arkham stated that 0xb1 held over 10% of all Celsius assets under management as of late 2020, and that they had sent $180 million to their customers in the five months after the audit.
According to the report, 0xb1 appears have returned $1.13 Billion of crypto assets to the crypto lender in February and May 2021. This corresponds to a 111% profit when denominated using U.S. Dollars.
Arkham pointed out that this may seem like a remarkable return on Celsius’ $530million investment, but it is not as impressive when you consider 0xb1s performance in crypto assets received from Celsius instead of in US dollars.
The report focuses on the overall performance of the crypto market. It notes that the price for Bitcoin rose from $11,000 to $60,000 during the period under review, posting gains exceeding 400%.
Ethereum, a “other significant asset Celsius entrusted to 0xb1,” soared nearly 900% from $400 to almost $4,000.
The report states that Celsius could have held the assets and sent them to 0xb1 instead. This would have made Celsius’s value $1.52Billion – nearly $400M more than what 0xb1 seems to have returned.
Celsius’s dubious business model
Arkham explains that Celsius decided to entrust corporate money to a third-party. He says that the New York-based company “possibly” sent 0xb1 user deposited assets that were accruing interest.
According to the report, Celsius’ relationship with Zero One could have led to Celsius being short of the deposited assets of its customers, and even the interest it promised them.
Arkham also noted that Arkham’s analysis of the lender’s business model was based on “pocketing both its returns and its interest payments to its users.”
According to the report, Celsius users could have been told by their account dashboards that they were earning crypto rewards that didn’t exist.
Jason Stone did not immediately respond to Decrypt’s request of comment when he was contacted via Telegram.
Decrypt also reached to Celsius. They returned an automated reply saying that they were “working to respond the many inquires we receive as quickly and efficiently as possible.” Users are also encouraged to visit the company’s official Twitter account and blog.