Key Takeaways:
- Celsius says it has $167 million of cash available to meet urgent needs.
- The firm had over $8 billion lent out to clients, and $12 billion in assets under management in May.
- The bankruptcy filing comes after a month of the firm pausing withdrawals.
- The firm is to continue to operate in the normal course.
Cryptocurrency lender Celsius Network announced on Wednesday that it had filed for Chapter 11 bankruptcy in the US, nearly after a month of freezing withdrawals and suspending all operations.
According to the official announcement, to ensure a smooth transition into Chapter 11, the crypto lender has filed with the Court a series of customary motions to allow the firm to continue to operate in the normal course.
"These "first-day" motions include requests to pay employees and continue their benefits without disruption, for which the company expects to receive Court approval. Celsius is not requesting authority to allow customer withdrawals at this time. Customer claims will be addressed through the Chapter 11 process", the press release reads.
Alex Mashinsky, Co-Founder & CEO of Celsius, described the bankruptcy filing move as the right decision adding that the company has a strong and experienced team in place to lead it through the process. Celsius, in its statement, said it had $167 million of cash available to meet urgent needs in the meantime. The restructuring plan will work towards restoring activity across the platform, returning value to customers, and providing choices.
The crypto lender paused all account withdrawals and transfers on June 13, citing “extreme market conditions.” The firm had over $8 billion lent out to clients and around $12 billion in assets under management as of May. Celsius justifying the move, said, “without the halt, the acceleration of withdrawals would have allowed certain customers, those who were first to act, to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they get a recovery.”
Also, read Celsius Onboards Advisers ahead of Potential Bankruptcy FilingEver since pausing withdrawals, the company has been working tirelessly to pay off its debt. As part of its last-ditch efforts before getting Liquidated, the crypto lender fully paid off its MakerDAO debt and further paid $50 Million in its Aave debt.
The latest bankruptcy filing come amid the firm facing scathing accusations from organizations. Recently U.S. state of Vermont’s Department of Financial Regulation (DFR) accused Celsius of being deeply insolvent. KeyFi has also filed a lawsuit against Celsius for allegedly using customer deposits to inflate its CEL token prices and for manipulating the broader crypto market. Following the bankruptcy filing, CEL-Celsius Network’s native token witnessed a $19.95% price drop in the last 24 hours.
Apart from Celsius, several other big names in the industry have also recently filed for bankruptcy. Crypto exchange Voyager Digital filed for Chapter 11 bankruptcy, while crypto hedge fund Three Arrows Capital (3AC) faced insolvency proceedings in the British Virgin Islands and soon filed for Chapter 15 bankruptcy. Cash-strapped Babel also recently halted withdrawals. As risky bets turn against crypto firms in the current bear market, it is yet to be seen how many more will succumb and file for bankruptcy in the coming days.
