Crypto Lending Platform Celsius files for Bankruptcy
Cryptocurrency lending platform Celsius announced on Wednesday that it had filed for bankruptcy in the U.S., just a month after it stopped withdrawals from its platform.
Celsius, in its statement, said it was seeking to restructure in a way that would maximize value for all stakeholders, and said it had $167 million of cash in hand to meet vital needs in the meantime.
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In the United States, Chapter 11 allows a firm that is unable to pay its debts to restructure away from its creditors, while continuing its current operations.
The company, which had amassed more than $20 billion in assets by offering interest rates as high as 18% to its clients who deposited their Cryptocurrencies, had stopped all withdrawals as well as some other functionalities in mid-June, citing “extreme market conditions."
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Cryptocurrency platforms have come under huge pressure as the Federal Reserve aggressively raises interest rates, hurting risk sentiment and squeezing funding costs. Crypto broker Voyager Digital Ltd. filed for Chapter 11 bankruptcy earlier this month, while liquidators have been consulted for bankrupt cryptocurrency hedge fund Three Arrows Capital. Other companies have also suspended withdrawals, such as CoinFlex and Babel Finance, due to a lack of cash.
In its statement Wednesday, Celsius called that break in proceedings a “difficult but necessary decision." Without the pause, it said, “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 receive a recovery."
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Alex Mashinsky, co-founder and CEO of Celsius said, "This is the right decision for our community and company. 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."
Celsius promised more than 18% yield to its customers willing to lend out their cryptocurrency. In turn, it lent those coins and tokens to institutional investors but also was a contributor in a slew of Decentralized Finance (DeFi) applications.
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