Exchange between Celsius and FTX Shift Crypto Holdings bankruptcy proceedings

As part of its Chapter 11 bankruptcy restructuring process, originally filed in July 2022, crypto lending platform Celsius is moving significant holdings to exchanges.

Last week, Celsius transferred $125 million worth of Ether to Coinbase and FalconX, according to on-chain analytics firm Arkham Intelligence. The transfers may mark the first steps by Celsius to refinance creditor payments as outlined in the reorganization plan.

Main points

Celsius last week transferred more than $125 million worth of Ether to exchanges Coinbase and FalconX. Lender Payments FTX and Alameda have also moved $28 million in crypto to exchanges, likely to raise money for their own lender payments, as the value of CEL Celsius' CEL token and their bankruptcy proceedings decline.

Celsius still holds control of more than 550,000 ETH—worth about $1.36 billion at current prices—previously locked up in protocols. In early January, Celsius disclosed that it had issued 206,300 ETH worth of an estimated $407 million, the money to help pay bankruptcy costs and prepare for a distribution to creditors.

While in bankruptcy, Celsius emphasized its intention to make its customers whole by divesting both Bitcoin and Ethereum holdings. However, specified timelines are unclear, resulting in Celsius initially facing liquidity problems in June 2022 with lenders waiting more than 18 months.

Meanwhile, fellow bankrupt firm FTX and its business partner Alameda Research have turned crypto assets into an exchange that mimics Celsius. According to blockchain analytics provider Spot On Chain, FTX last week moved $28 million worth of crypto, $18.7 million in Wrapped Bitcoin token (WBTC) to Coinbase and Binance.

???? Institutions #FTX and #Celsius moved $35.1M of $WBTC and $ETH to CEX as $BTC and $ETH prices surged in 24H.

1. #FTX and #Alameda Research moved $11.72M including: – 200$WBTC ($9.39M) to #Binance at $46,952 – 1,000$ETH ($2.33M) to #Coinbase at $2,330

2.… pic.twitter.com/o79tjOQWLk

— Spot On Chain (@spotonchain) January 9, 2024

The transfers will be in line with FTX's recent efforts to raise capital to pay off creditors after it declares bankruptcy in November 2022. FTX managers have recovered nearly $7 billion in assets so far, including $3.4 billion in cryptocurrencies. Early recovery rates in October 2023 would see the lender claim between $0.80 and $1.00 per dollar.

In addition to moving assets to exchanges, activity on the chain shows that the Celsius native CEL management token is experiencing a decrease in trader interest during bankruptcy proceedings. CEL's price is down 24% in the last month, trading at $0.20 – down 70% in the last year.

According to derivatives data provider Konglas, open interest in CEL futures has fallen 36 percent since the end of December, with traders closing positions at higher levels. As the Celsius restructuring continues to weigh on CLL markets, technical indicators underline bearish sentiment.

While creditors are still awaiting payment after 18 months, Celsius and FTX's recent crypto-to-exchange transfers may offer first glimpses into their respective insolvency plans. But progress has been slow for both companies. The moves also carry broader market risks if the offerings trigger further cryptocurrency sales.