FTX and Tether were closer to Celsius than anyone realized

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—by Protos Staff
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Dirty Bubble Media has published the results of an investigation into links between Sam Bankman-Fried’s (SBF) companies and Celsius. As it turns out, FTX, SBF, Celsius, and even Tether are far more financially linked than previously thought — with ties running deeper than SBF’s Alameda Research becoming a major creditor to now-bankrupt Celsius.

The person behind Dirty Bubble Media, known as Mike Burgersburg, said he did some significant digging into public records, media reports, and blockchain data.

Burgersburg’s investigation turned up some interesting tidbits:

  • Celsius allegedly used FTX as a trading platform to support its own CEL token by buying more than 40 million CEL in 2021. Celsius’ purchases of CEL coincided with a $750 million fundraising round at a $3 billion valuation led by WestCap and CDPQ.
  • After freezing withdrawals, Celsius allegedly used FTX’s exchange to liquidate millions of dollars in customers’ assets. It used the funds to pay back DeFi loans and also got a $104 million loan from FTX discharged.
  • Celsius sent hundreds of millions of dollars worth of stablecoins through FTX to distribute the proceeds to institutional borrowers. The loans included a significant disbursement to failed crypto hedge fund Three Arrows Capital (3AC).
  • Alameda Research made enough unsecured loans to Celsius Network to become one of its biggest creditors. Alameda Research also manages the “Pharos Fund,” which became Celsius’ biggest creditor.
  • Celsius Network and Sam Bankman-Fried have close ties to Tether.

How much knowledge did FTX and SBF have about Celsius’ trades?

SBF hinted that he might buy Celsius’ remaining assets in a play similar to Voyager Digital. Voyager Digital declared bankruptcy around the same time as Celsius.

Read more: FTX readies bid as Celsius goes up for sale

It’s difficult to imagine that SBF overlooked that Celsius Network, or someone connected to it, bought a lot of CEL on FTX, since FTX added CEL spot markets in 2021. Court filings show that Celsius Network bought nearly 42 million CEL between May and December 2021. 

SBF himself tweeted that FTX was listing CEL for spot trading.

Blockchain analytics firm Nansen noticed that as many as 60 million CEL tokens resided in FTX wallets at one point in 2021. When asked about it, SBF said CEL could be used as collateral on the exchange.

If FTX employees were paying attention, they might have noticed patterns indicating that Celsius Network was using the exchange as a sort of clearinghouse. Celsius sent $750 million worth of USDC through FTX after borrowing $1.2 billion in stablecoins from the DeFi apps Aave and Compound between June and October 2021. It was using the money to initiate loans of its own.

That, of course, assumes that SBF and FTX employees were closely monitoring what was happening on their own exchange — not as big of an assumption as one might expect, considering that Alameda Research and Pharos Fund were two of Celsius Network’s biggest creditors. SBF might want to know what’s going on with someone who owes him money.

SBF, FTX, and Celsius Network have ties to Tether

According to Burgersburg, both SBF and Celsius Network have ties to Tether, the issuer of USDT. Tether initially claimed that USDT was 100% backed by cash but now admits that USDT is backed by a basket of assets that include cash and “cash equivalents.” It recently claimed that it replaced commercial paper with US Treasury Bills. However, it was caught lying about its reserves in the past.

Tether became an early investor in Celsius when it invested $10 million in its first funding round two years ago. It loaned Celsius $1 billion worth of USDT in 2021 and made a $97 million profit when the now-bankrupt crypto lender defaulted on the loan in May 2022 and Tether repossessed the collateral.

SBF’s Alameda Research received $36.7 billion in USDT and routed $30 billion in USDT to FTX. Most of the balance went to other exchanges. With this much value in USDT routed through Alameda Research and FTX, SBF will naturally defend Tether despite its track record.

SBF is a Tether apologist.

Read more: Sam Bankman-Fried markets Celsius bid as altruism for users

Dirty Bubble Media produced a detailed analysis of the connection between SBF and Celsius. This connection seems to go deeper than SBF’s companies simply ranking high among its biggest creditors.

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