Embattled Crypto Lending Platform Celsius Files for Bankruptcy Protection

07/14/2022By: L, Laura

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Crypto lender Celsius has started filing for bankruptcy protection. The embattled exchange has finally turned Chapter 11 rumors into reality after a month of turmoil.

 

After weeks of speculation and rumors, lawyers representing crypto lender Celsius have officially notified regulators that the company has started filing for Chapter 11 bankruptcy protection.

 

“This is the right decision for our community and company,” Celsius Co-Founder & CEO Alex Mashinsky said in a press release posted late Wednesday. “We have a strong and experienced team in place to lead Celsius through this process.

 

“I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company,” he continued.

 

Celsius says the filing will provide the opportunity to stabilize its business and consummate a comprehensive restructuring that maximizes value for all stakeholders.

 

According to the release, Celsius and some of its subsidiaries filed “voluntary petitions for reorganization under Chapter 11” in the United States Bankruptcy Court for the Southern District of New York. The company touts “ample liquidity with $167 million in cash to support operations.”

 

Celsius’ troubles began after the company paused all customer withdrawals and swaps in June, citing liquidity issues prompting regulators from Alabama, Kentucky, New Jersey, Texas, and Washington to open investigations.

 

“We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets,” the company said at the time. “Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers.”

 

Celsius spent the next month paying back loans and its outstanding debts totaling over $1 billion.

 

Yesterday, a press release by the Vermont Department of Financial Regulation advised Celsius investors to proceed “with caution,” saying the crypto firm is “deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors.”

 

Celsius is not registered to operate in Vermont. The state regulator also advised investors to beware of potential scams and forums encouraging short squeezing of the CEL token.

 

Last week, Jason Stone, CEO of KeyFi, Inc., filed a lawsuit against Celsius. In the lawsuit, Stone alleges that Celsius used customer funds to “manipulate crypto asset markets, had failed to institute basic accounting controls which endangered those same deposits, and had failed to carry through on promises.”

 

On Sunday, the Wall Street Journal reported that Celsius had hired new lawyers from Kirkland & Ellis LLP to oversee the company’s restructuring plans.

 

The news of Celsius’ bankruptcy filing represents the latest Web3 firm to collapse in the harsh crypto winter, which already has claimed Three Arrows Capital and Voyager Digital.

 

Related Reading:

Behind Voyager Failure: How Crypto Broker Went Bankrupt Like a Bank?

What Happens If Crypto Exchanges Such as Celsius or Coinbase Goes Bankrupt?

Celsius Recovers $418M ‘stETH’ Stack from Aave Loan

Three Arrows Capital (3AC) Files for Bankruptcy

Investors Lost ‘Millions’ on Voyager Bankruptcy, Some Have Their Life Savings Frozen