Concerned Cryptocurrency Lender Celsius Network Confirms It Has Filed Bankruptcy Protection As It Tries To Restructure
Celsius Network has filed a Chapter 11 (bankruptcy) lawsuit in the US as it seeks breathing space from its creditors to implement a restructuring.
Yesterday Silicon UK reported that Vermont’s Department of Financial Regulation (DFR) said it believed Celsius was “deeply insolvent and lacked the assets and liquidity to meet its obligations to account holders and other creditors.”
Now, the cryptocurrency lender has confirmed that it has “initiated voluntary Chapter 11 proceedings to allow the company to stabilize its business and execute a comprehensive restructuring transaction that maximizes value for all stakeholders.”
The New Jersey-based Celsius Network has filed for Chapter 11 bankruptcy in the US Bankruptcy Court for the Southern District of New York.
It comes after Celsius Network froze all withdrawals, swaps and transfers between customer accounts last month, citing “extreme” terms.
That prompted a number of US state regulators to investigate the cryptocurrency lender’s decision.
“Today’s filing follows Celsius’s difficult but necessary decision last month to suspend withdrawals, swaps and transfers on its platform to stabilize its business and protect its customers,” said members of the board’s special committee. .
“Without a pause, the acceleration of withdrawals would have allowed certain clients – those who acted first – to be paid in full, while others would have had to wait for Celsius to harvest value from illiquid or longer-term asset betting activities before receiving a recovery.” , they said.
“This is the right decision for our community and our company,” said Alex Mashinsky, co-founder and CEO of Celsius.
“We have a strong and experienced team to guide Celsius through this process. I am confident that when we look back on Celsius’s history, we will see it as a defining moment, when acting with determination and confidence served the community and strengthened the company’s future,” said Mashinsky.
Celsius said it has “$167 million in cash on hand, which will provide enough liquidity to support certain operations during the restructuring process.”
But Celsius estimated its assets and liabilities at between $1 billion and $10 billion, with more than 100,000 creditors.
Celsius, which is one of the largest crypto lending platforms worth $12 billion, allows users to lend their tokens as collateral for other crypto projects in exchange for annual returns of up to 17 percent.
But investor interest in such risky areas has waned since the collapse of the TerraUSD “stablecoin” in early May, which was linked to a similar high-yield scheme along with the Luna coin.
Celsius last month said it paused all withdrawals, transfers and swaps after weeks of speculation about the sustainability of its large returns.
The company’s business model, like that of Terra, in which it was an investor, depends on a steady stream of new entrants feeding or borrowing the system to pay the high rates.
After Terra’s collapse, some critics compared the business model to a pyramid scheme.
“We apologize that communication with our teams and community has been very limited in recent weeks, and we look forward to bringing greater transparency to everyone with our reorganization, encouraging dialogue with all stakeholders,” the company added. up. blog post about the case.