Bankrupt Lender Celsius Network Withdraws $780M in Staked Ethereum

Bankrupt crypto lender Celsius Network has reportedly withdrawn 428,000 staked Ethereum (stETH) valued at $780 million. Interestingly, this coincides with the introduction of a withdrawal feature by Lido Finance, a liquid staking solution for ETH 2.0.

It is possible that the withdrawals could be an effort toward liquidating its assets in order to reimburse its customers or creditors amid ongoing bankruptcy proceedings. While Celsius Network has not entirely moved all of its sETH, the firm did, however, removed 0.1 stETH from Lido a few hours after enabling withdrawals.

Notably,  it could indicate that the firm was testing the withdrawal process or exploring the functionality of the platform. Meanwhile, the implementation of a version 2 upgrade on Lido allows stETH holders to withdraw their Ethereum at a 1:1 ratio. 

sETH is a representation of Ethereum that has been staked in a proof-of-stake (PoS) network. In the PoS model, participants can stake their ETH by locking it up in a specialized smart contract called a staking contract. By doing so, they contribute to the network’s security and consensus process. In return for staking their ETH, participants earn rewards in the form of newly minted ETH.

Celsius Network Hindered by Liquidity Issues

Liquidity issues can affect many DeFi systems and protocols, particularly those involved in staking and token conversions. Previously, Celsius Network Network implemented a strategy involving staking ETH received on its lending platform with Lido Finance to obtain stETH. 

This allowed Celsius Network to use stETH as collateral on DeFi platforms like Aave, enabling them to generate additional yield on their customers’ funds. The collaboration with Lido Finance provided a capital-efficient solution for Celsius Network and its users. 

However, mid-last year, Celsius Network had liquidity issues and eventually filed for bankruptcy, which made converting their stETH holdings back to ETH difficult. This was due to Curve, the primary exchange offering stETH trade, not having enough cash to facilitate swaps back to ether without significant slippage.

However, with the new withdrawal feature now available on Lido, Celsius Network has a higher possibility of recovering its ETH and possibly returning it for continued restructuring work.