A recent report from the Wall Street Journal (WSJ) has revealed that embattled crypto lending platform Celsius Network took on more risk than it could naturally handle.
A review of the data sent to investors when it last raised $400 million showed that the company, led by Alex Mashinsky, had a total asset base of $19 billion with its equity contribution pegged at just $1 billion.
From this figure, the WSJ made an analogy that showed Celsius Network’s Asset-to-Equity ratio was more than double the average for all the North American banks in the S&P 1500 Composite index, which is close to 9:1.
With this ratio known as one of the major markers of a highly risky portfolio, Celsius's outlook was one of a large financial institution with access to the Federal Reserve’s bailout. The obvious unsustainability profile of the firm was pointed out with the halt of transactions earlier this month.
“It’s just a risky structure,” said University of Chicago economist Eric Budish of Celsius to...
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