Cryptocurrency’s bad news week as told by Babel, Celsius, and Three Arrow Capital - The Verge

Three big firms — Celsius Network, Three Arrows Capital, and Babel Finance — appear distressed. The trouble in the market may be even bigger.

This week has revealed to the average investor just how interconnected cryptocurrency firms are. Two firms have frozen withdrawals, and a cryptocurrency hedge fund is in trouble. Celsius Network, Babel Finance, and Three Arrows Capital are floundering, and it’s not yet clear how extensive the damage may be.

This week started with a Sunday night announcement from the Celsius Network, a gigantic crypto lending company, that it would pause withdrawals and transfers. After that, the value of Bitcoin and other cryptocurrencies, already weeks into a slide that some have termed a “crypto winter,” plunged even further, and five days later, the news hasn’t improved much.

All three firms managed other peoples’ money. Celsius Network wooed retail investors. Babel Finance, which CNBC says has 500 clients, raised $80 million in a funding round a month ago. 3AC, which invested in crypto startups, managed $10 billion in assets in March, according to Fortune. The ripple effects from the firms’ woes are likely to affect the broader cryptocurrency ecosystem.

First up is Celsius, which has published a single statement in the week since its freeze: an FAQ that doesn’t tell investors when or if they will get access to their funds. CEO Alex Mashinsky tweeted that the team is working “non stop” and thanked unnamed people for their patience and support, without commenting on reports the company has hired restructuring attorneys.

The company had $12 billion in assets under management as of May. Mashinsky framed Celsius as a hybrid decentralized / centralized financing approach that could be an equivalent to securities lending. But Celsius lost millions due to a mistake that forfeited restitution payments after the BadgerDAO hack and another 35,000 ETH last summer when the Ethereum staking service Stakehound apparently misplaced private keys, and its tokens became worthless as a result, according to a report in CoinDesk. It did not inform customers of the loss. CoinDesk compared Celsius’ collapse to that of Lehman Brothers in 2008, which spooked financial markets.

https://www.theverge.com/2022/6/17/23172539/3ac-celsius-babel-crypto-loans-hedge-funds-uh-oh

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