With $950 Million in Collateral as the Prize, Celsius Turns to Pay Off Aave, Compound Debt

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The cash-strapped cryptocurrency lender Celsius, this week paid off $223 million in loans on the Maker blockchain technology to release $450 million in collateral. In a new development, it may attempt a similar tactic with two other significant decentralized finance (DeFi) platforms: Aave and Compound.

A crypto wallet connected to Celsius by blockchain intelligence company Nansen lowered its outstanding debt to Aave and Compound on Friday from $258 million to $235 million, according to data on the DeFi data dashboard Zapper.

Will Celsius Fully Repay its loans?

If Celsius fully repays the loans, the cryptocurrency lender will be able to seize $950 million in assets that are currently locked up on the DeFi protocols and promised as security for the debt. These actions appear to be a part of the company’s plan to restructure its debt in accordance with DeFi rules and recover the priceless collateral that has been temporarily locked up in order to fill a purported hole on the balance sheet.

The wider picture is that in the age of decentralized finance, astute watchers with access to blockchain-data explorers are gaining a front-row seat to see a struggling cryptocurrency company as it struggles to find a liquidity solution.

According to reports, Celsius, led by CEO Alex Mashinsky, has hired banking giant Citigroup (C) to advise on funding possibilities and is collaborating with restructuring specialists from advisory firm Alvarez & Marshal. In a statement on June 30, the firm stated that it was looking into ways to “preserve and protect assets.” These measures could include pursuing strategic mergers and reorganizing liabilities.

Celsius dunking 24k $WBTC (half a billion dollars worth) onto FTX.

Nothing to see here. pic.twitter.com/phFcDZXZ7H

— Nansen Intern (@nansen_intern) July 7, 2022

Blockchain data reveals that Celsius began to pay down its debt to DeFi protocols one day after that declaration. The cryptocurrency lender paid out its loan in full in less than a week and obtained wrapped Bitcoin (WBTC), as collateral worth $450 million. After some time had passed, the company sent $500 million worth of WBTC to the cryptocurrency market FTX, probably with the aim of selling.