Goldman Sachs Plans to Raise $2B for Buying Celsius’ Assets if Firm Goes Bankrupt
Leading global investment bank Goldman Sachs reportedly aims to raise $2 billion from investors to buy up assets of Celsius. Ironically the troubled crypto lender had been operating under the motto “unbank yourself” for years presenting the platform as an alternative to traditional banking. Earlier this month, Celsius halted withdrawals and transfers for clients.
If Celsius declares bankruptcy and the deal goes through, it would allow Goldman Sachs and its investors to buy up the firm’s assets at huge discounts. There is also the question of whether client funds would be a part of the bankruptcy proceedings or not.
Celsius Recently Hired Advisors and Restructuring Attorneys
Celsius hired restructuring consultants from advisory firm Alvarez & Marsal to advise on a possible bankruptcy filing, as reported by the Wall Street Journal last week. The move comes nearly three weeks after the company abruptly froze withdrawals citing “extreme” market conditions.
Aside from Alvarez & Marsal, the crypto lender has also hired restructuring attorneys from the law firm Akin Gump Strauss Hauer & Feld, reported earlier this month. There were also reports that Celsius has reached out to global investment bank Citigroup for advice on possible solutions, including an assessment of an offer from rival crypto lender Nexo.
As Celsius prepares for a potential bankruptcy, Goldman Sachs is trying to raise $2 billion from investors to buy up distressed assets from the company.
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Celsius Aimed to Unbank the World
Founded in 2017, Celsius started as a crypto lending platform that allowed users to receive high interest on deposited cryptocurrencies. The slogan for Celsius was “unbank yourself.”
On numerous occasions, CEO Alex Mashinsky said they choose this slogan because banks nowadays do not care about users. He said:
“We feel that banks have become such monopolistic institutions that they stopped caring for their depositors, they only care for their shareholders. They are basically extracting way too much from all of us, the 99% of Americans who are not part of the 1%, and giving it all to the few people who are the major shareholders of these institutions.”
In order to achieve this goal, Celsius started offering unprecedented APY rates of more than 10%. In comparison, banks were offering interest rates of less than 1%. To afford the high APY rates, the company reportedly had to take risky bets, some of which have not gone well.
“They engaged in risky strategies for generating yield on their depositors’ funds — riskier than their competitors,” Laura Shin, a crypto researcher said. “This is one of the big reasons they likely could not meet redemptions.”
Nevertheless, the fact that Celsius has not managed to resume withdrawals even after three weeks suggests that it could be suffering from severe liquidity issues. This describes why the company’s insolvency rumors have gone viral recently.
Moreover, Celsius users “will not be able to exercise rights of ownership,” have no claim to any compensation Celsius gets for lending out those assets, and “may not be able to recover or regain ownership of such Digital Assets” in the event of bankruptcy.
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