Cryptocurrency Lender Celsius Files For Bankruptcy

After a month of turmoil, the cryptocurrency business Celsius has for Chapter 11 bankruptcy protection. Celsius announced its plans to restructure in a way that “maximises value for all stakeholders” on Wednesday in a statement. According to Celsius, company has $167 million in cash on hand to cover operating costs in the interim. Earlier, CNBC reported that as of Wednesday evening, the company’s attorneys were contacting specific U.S. state authorities, according to a person who wanted to remain anonymous since the proceedings were confidential.

In a statement, Celsius co-founder and CEO Alex Mashinsky said, “This is the right choice for our community and company.” “I am convinced that this will be remembered as a pivotal time in Celsius history, where acting decisively and confidently benefited the neighbourhood and secured the company’s future.” Following the freezing of customer accounts, the Hoboken, New Jersey-based corporation made headlines by citing “extreme market conditions.” With prices falling, Wednesday’s news is the most recent prominent crypto bankruptcy.

Read more:

After suffering losses as a result of exposure to the now-defunct hedge fund Three Arrows Capital, Voyager filed for Chapter 11 bankruptcy protection last week. This Monday, a bankruptcy judge in New York froze the remaining assets of Three Arrows Capital. The fund is currently going through the liquidation procedure.Sadly, this was anticipated. It was expected. However, it doesn’t put a stop to our inquiries. Even though Celsius filed for bankruptcy, we will keep looking into the business and working to safeguard its customers, according to Joseph Rotunda, director of enforcement at the Texas State Securities Board.

CNBC contacted Celsius for comment, but they did not answer right away. According to the bankruptcy filing, the company has more than 100,000 creditors, who may be both clients and lending counterparties. The Pharos Fund, situated on Cayman Islands, has the largest unsecured claim against it, for $81 million. Alameda Research, a trading company owned by billionaire FTX CEO Sam Bankman-Fried, is listed as a creditor in the filing with a $12 million unsecured loan.

With about $12 billion in assets under management and more than $8 billion in loans to clients as of May, Celsius was one of the biggest players in the cryptocurrency lending market. With 1.7 million members as of June, Celsius claimed that it was in a competitive market with its interest-bearing accounts and returns as high as 17%. Customers’ cryptocurrency would be lent out by the company to counterparties willing to borrow it at exorbitant interest rates. Then, Celsius would share some of that money with its customers. Nevertheless, the industry’s financial crisis caused the structure to collapse.

A former investment manager filed a lawsuit against Celsius last week, alleging that the company failed to hedge risk, fraudulently inflated the price of its own digital token, and participated in fraudulent activity. Investigations into Celsius have already been started by six state regulators. On Wednesday morning, Vermont became the newest state to do so. Celsius “deployed customer assets in a variety of risky and illiquid investments, trading, and lending operations,” according to the state’s Department of Financial Regulation.

The Vermont regulator stated in a statement that “Celsius customers did not receive important disclosures concerning its financial situation, investing operations, risk factors, and ability to meet its commitments to depositors and other creditors.” The company’s investments and assets are probably insufficient to pay off its outstanding debts According to principal at Gordian Crypto Advisors and Georgetown law professor Adam Levitin, clients of Celsius may only be entitled to cents on the dollar and may have to wait years to see their money again. Customers who participated in Celsius’s high-yield deposit offer might be viewed by the court as unsecured creditors.

Levitin told CNBC, “I don’t think Celsius is the last of the crypto bankruptcies, but the treatment here seems to be that the customer’s crypto is truly the company’s property, and as an unsecured creditor, you don’t get your bitcoins back.” “We’re just waiting to see how far the tide goes out, but the tide is still going out.”

Related Articles

Back to top button