Cryptocurrency lender Celsius Network files for bankruptcy as prices crash
Celsius initiates voluntary Chapter 11 proceedings in New York City
The cryptocurrency lender Celsius Network announced Wednesday that it would file for bankruptcy.
Celsius said it initiated voluntary Chapter 11 proceedings to provide the company with the opportunity "to stabilize its business and consummate a comprehensive restructuring transaction that maximizes value for all stakeholders," according to Business Wire. "To implement the restructuring, the company and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York."
Celsius already moved last month to pause withdrawals, swaps, and transfers on its platform.
As of May, Celsius said it had $11.8 billion in assets on hand, down from about $15 billion in October. In announcing the bankruptcy proceedings, the company said it had $167 million in cash on hand, "which will provide ample liquidity to support certain operations during the restructuring process."
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In this photo illustration, the Celsius Network logo seen displayed on a smartphone screen. ((Photo Illustration by Rafael Henrique/SOPA Images/LightRocket via Getty Images) / Getty Images)
"This is the right decision for our community and company," co-founder and CEO Alex Mashinsky said. "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."
The logo of the crypto company Celsius is seen on the screen of a computer in an office. (Photo: Silas Stein/ (Photo by Silas Stein/picture alliance via Getty Images) / Getty Images)
The prices for Bitcoin and other cryptocurrencies have plunged in recent weeks, pushing Celsius’ business model to the breaking point. The company once branded itself as less risky compared to banks with a better return for its customers. But Celsius made lofty yields to cryptocurrency depositors and issued large loans backed by little collateral, according to The Wall Street Journal.
The booth of the Celsius Network crypto platform at the Paris NFT Day conference in Paris, France, on Tuesday, April 12, 2022. (Photographer: Benjamin Girette/Bloomberg via Getty Images / Getty Images)
Celsius customers do not have the same protections offered to customers of banks with federally backed deposit insurance, making them more vulnerable to losses as the matter plays out in bankruptcy court. Fortune reported that Celsius’ terms of use do not guarantee deposits are protected or can be recovered in the event of bankruptcy.
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Celsius said Wednesday it is not requesting authority to allow customer withdrawals at this time, and customer claims will be addressed through the Chapter 11 process.