Over 500,000 ETH Ready to Be Dumped? The Data and Chaos Hidden Behind Celsius
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Over 500,000 ETH Ready to Be Dumped? The Data and Chaos Hidden Behind Celsius
Currently, Celsius's ETH holdings have already developed a shortfall, so the remaining ETH that Celsius holds can be used for very limited purposes.
Navigating Web3 tides with focused insightsAuthor: 0xBoboShanti
Translation: Frank, Foresight News
Celsius holds approximately 584,000 ETH (worth $1.4 billion) in its wallets and has so far transferred 92,000 ETH to Coinbase and FalconX.
Many commentators have said that Celsius still has over 500,000 ETH available for selling, but I believe this is incorrect. After more than 40 hours of research into legal documents, I will explain why I think this claim is wrong.
Background
On December 27, 2023, the court approved Celsius’s continued pursuit of the "MiningCo transaction"—a path out of bankruptcy with key terms including:
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Investing $225 million to establish a Bitcoin mining company;
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About $2.1 billion in liquid crypto assets (defined as BTC and ETH) to be distributed to creditors;
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Agreements reached with PayPal and Coinbase regarding distribution of liquid crypto assets to creditors;
Crypto Holdings of Celsius
The latest court filings provide an update on Celsius's crypto holdings as of October 20, 2023:
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888,000 ETH (or ETH equivalent);
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38,000 BTC (or BTC equivalent);
Creditor Claim Categories
(Note: Valuation during claims processing used an ETH price of $1,088. The final asset distribution exchange rate table has not yet been published, which will determine how much ETH/BTC each claim category receives based on their claim amount—likely close to current market prices.)
Additionally, due to ongoing case developments and cryptocurrency price fluctuations, exact claim figures may vary.
Withdrawable Custodial Claims and General Custodial Claims: Withdrawable custodial claims will receive 100% recovery; general custodial claims will receive 72.5% of their claimed value.
These are distributed in-kind based on token balances held by claimants as of the filing date (June 2022).
Exact token amounts were not disclosed publicly, so for simplicity, this article uses the publicly reported dollar amount—$206 million—for calculations.
Distribution for these claims has already begun.
Retail Borrower Deposit Claims: In short, borrowers can get funds returned in BTC or ETH upon repayment of outstanding loans.
This means $607 million essentially does not need to be counted and will be returned as crypto.
General Unsecured Claims (and other unsecured creditors): This is the most significant category, totaling up to $3.9 billion in claims.
This situation is more nuanced, depending on voting options and other factors. For simplicity (while ignoring many subtleties), claimants are expected to receive about 61.2% of the total ~$4 billion in claims, equating to roughly $2.39 billion.
This includes “liquid crypto” (defined as BTC or ETH), common stock in the newly funded mining company, and potential litigation proceeds (if any).
Convenience Claims: These will also be settled in liquid crypto (ETH or BTC).
Due to different conversion rates used when determining claim values and pending BTC/ETH allocations, it's currently difficult to determine exactly how many tokens will go back to claimants.
Distribution for this portion is expected to begin within the coming weeks, with conversion rates announced beforehand.
As shown in the chart, estimated disbursements are around $350 million, including a $75 million reduced budget held in escrow. Celsius likely already liquidated part of its ETH holdings to fund these expenses.
Moreover, $613 million has been set aside as a reserve for unresolved claims. We can assume this amount won’t be touched in the foreseeable future and is expected to largely be distributed to claimants eventually.
This reserve consists of a combination of liquid crypto + MiningCo common stock. The exact proportion of crypto remains unclear. For simplicity, this article assumes all $613 million is in crypto.
Data Aggregation
Overall, as of October 20, 2023, Celsius held 888,000 ETH and 38,000 BTC, valued at approximately $3.7 billion as of January 17, 2024.
According to Arkham data, Celsius currently holds 584,000 ETH (~$1.51 billion) and 9,800 BTC (~$422 million)—totaling $1.9 billion in crypto assets.
If we assume “Celsius has sold off their ETH,” this would mean 244,000 ETH ($573 million) have already been disposed of.
Since Arkham did not capture all 38,000 BTC as of October 20, 2023, it may have missed some Celsius wallets, making it unclear how many BTC have actually been liquidated.
Given the total pool of “liquid crypto,” this analysis will use today’s prices, assume Celsius still owns all 38,000 BTC, and apply a 60/40 ETH-to-BTC allocation ratio.
Based on prior charts:
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$613 million reserved for unresolved claims (60% ETH: ~156,000 ETH);
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$350 million for disbursements (60% ETH: ~89,000 ETH);
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$124 million in custodial claims to be distributed in crypto (likely only ~26,000 ETH based on earlier calculation), ongoing since November 2023;
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$242 million in convenience claims to be returned in crypto (60% ETH: 62,000 ETH);
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$2.1 billion allocated to unsecured claims (including general unsecured claims) (60% ETH: 536,000 ETH);
In summary:
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Starting balance: 888,000 ETH;
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Minus 89,000 ETH for expenses = 799,000 ETH;
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Minus 156,000 ETH reserve = 643,000 ETH;
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Minus 26,000 ETH for custodial claims = 617,000 ETH;
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Minus 62,000 ETH for convenience claims = 555,000 ETH;
Then comes distribution to unsecured creditors (e.g., general unsecured claims), which represents the vast majority of claims and is expected to receive $2.1 billion in liquid ETH and BTC.
Assuming again a 60% ETH / 40% BTC split, this translates into 536,000 ETH at current prices, meaning Celsius currently holds only 584,000 ETH.
And Celsius cannot “sell all its ETH,” otherwise it would fail to meet its legal obligations to creditors.
Notably, both Coinbase and PayPal act as distribution agents for claims under the MiningCo transaction terms. Therefore, Celsius may make additional transfers to Coinbase soon—not necessarily indicating sales (as noted above, their ability to sell is extremely limited).
One thing to note: large transfers to Coinbase and FalconX began only on November 13, 2023—just days after the bankruptcy court confirmed the initial reorganization plan.
Terms in the plan required Celsius to quickly pay certain custodial accounts (such as professional fees) in cash—this could explain deposits made to FalconX.
At that time, certain custodial claimants also became eligible to withdraw their physical tokens, possibly explaining the Coinbase transfers.
Additionally, about 156,000 ETH is held in a separate reserve account for unresolved claims—this might explain several Coinbase transactions.
Conclusion: Celsius Has an ETH Shortfall
Under current circumstances:
Celsius currently holds 584,000 ETH, of which approximately 536,000 ETH will be physically distributed to unsecured creditors; 62,000 ETH will be distributed for convenience claims; and around 26,000 ETH may already have been sent to Coinbase and PayPal to handle custodial claim distributions.
Based on this calculation, Celsius already faces an ETH shortfall (under a 60/40 distribution assumption), meaning Celsius has very limited flexibility with its remaining ETH holdings.
Considering recent weeks’ transfers to FalconX, Celsius likely already sold whatever ETH needed to fund specified costs and expenses (such as the $225 million MiningCo capitalization and professional fees).
The effective date is expected to commence around January 31, 2024, followed by full-scale distributions. In short, Celsius is unlikely to have much (if any) additional ETH available for actual sale.
Insane Details Hidden Behind Celsius
By the way, the Celsius case is absolutely insane. Here are some shocking facts I found in the documents that haven't been widely reported:
When GBTC was trading at a 40% premium, Celsius invested approximately $950 million into Grayscale. But the GBTC premium quickly turned negative, resulting in about $130 million loss on GBTC and another $30 million loss on other Grayscale products.
This trade, known as the "widowmaker," led to the collapse of several crypto giants (e.g., Three Arrows Capital).
On February 2, 2021, Celsius transferred 35,000 ETH (worth $88 million today) to StakeHound for native staking with validators.
Three months later, StakeHound informed Celsius that validator private keys were lost—permanently locking up this portion of ETH.
StakeHound blamed Fireblocks, while Fireblocks denied responsibility. Several related lawsuits are now ongoing in the U.S. and Israel.
If the private keys are indeed permanently lost, this increases ETH’s deflationary pressure.
Celsius accepted loan collateral from FTX and Alameda Research in the form of FTT and SRM.
Notably, $814 million in loans provided to Alameda Research were partially secured by $520 million worth of FTT.
By May 2022, FTT and SRM accounted for 50% of all collateral pledged to Celsius.
Celsius implemented an institutional lending credit rating system with defined credit limits. However, these rules were not always followed—many loans significantly exceeded credit limits, such as:
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Loans to Tether were twice their credit limit;
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Loans to Three Arrows Capital were three times their credit limit;
In early 2022, Celsius deployed at least $300 million worth of ETH into Terra’s Anchor Protocol.
Their risk team opposed this move, but management proceeded anyway. By the time Terra collapsed, Celsius had deployed $900 million on Terra.
Fortunately, they acted swiftly during the UST depeg and lost only about $30 million.
Celsius engaged in exchange-trading strategies, but this appeared to be a costly business venture, losing $150 million due to failed cash and arbitrage trades.
In January 2022, BTC dropped from $69,000 to a low of $30,000 within two months. Celsius’s former Chief Risk Officer claimed CEO Mashinsky instructed the trading desk to sell all BTC on January 23 and 24.
This resulted in a net sale of about 6,750 BTC. A few days later, CEO Mashinsky instructed via WhatsApp to repurchase 3,750 BTC.
Celsius’s policy was not to engage in directional trading, but Mashinsky allegedly bypassed this rule—skipping finance and risk leadership—to directly instruct the trading desk to sell (at the bottom) and buy back days later at higher prices.
Additionally, Celsius staff reportedly paid extreme attention to Mashinsky’s public statements. It got so bad that several employees were tasked with scrubbing all traces of his remarks from the internet.
Celsius spent over $350 million buying CEL tokens from the secondary market, sometimes even when the company lacked sufficient funds to do so (Hint: you were the exit).
Meanwhile, the CEO and other executives sold large portions of their personal CEL holdings.
I am not a lawyer, and the above reflects my interpretation of Celsius’s current situation after reviewing thousands of pages and numerous documents over the past few days. There may be errors or misunderstandings.
I welcome corrections from anyone closely following the Celsius bankruptcy case—or comments explaining why I shouldn’t remain bullish on ETH.
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