Embattled Crypto Lender ‘Celsius’ Files For Bankruptcy

July 15, 2022, 10:42 AM AEST (updated July 19, 2022)

In what some have described as crypto’s “Lehman moment”, troubled lender Celsius has officially filed for “financial restructuring” under Chapter 11 of the US Bankruptcy Code. 

Controversy Reigns

To many in the industry, Celsius has remained one of the more controversial businesses, with many citing its yield as unsustainable.

These claims go as far back as 2019, reflected in a “discussion” where the company’s founder Alex Mashinsky clashed with Bitcoiners Tone Vays and Saifedean Ammous regarding the company’s business model:

In many ways, the writing was on the wall as warning bells flashed in April as Celsius paused interest accounts for users. Later in June, the company halted user withdrawals, but only after sending US$320 million to crypto exchange FTX.

As crypto broker Voyager filed for bankruptcy, in addition to crypto lender Vauld freezing withdrawals, many felt that it would be a matter of time before Celsius caved.

Nail in the coffin

Late on July 13, Celsius finally confirmed it was initiating voluntary Chapter 11 proceedings to “stabilise its business and consummate a comprehensive restructuring transaction that maximises value for all stakeholders”.

Continuing, the board of directors said:

Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilize its business and protect its customers. Without a pause, 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.

Celsius board of directors’ statement

Interestingly, as Swan Bitcoin founder Cory Klippsten commented, it would appear as if beleaguered users are at the back of the queue when it comes to Celsius’ stakeholders:

While the company apparently has some US$167 million in cash, it noted that initial approval would be sought to allow payment to employees, but that it would “not be requesting authority to allow customer withdrawals at this time”.

While the announcement is not likely to be welcome news to users whose funds remained frozen, it does offer vindication for those who saw it in advance and managed to persuade users to jump ship:

Disclaimer: The content and views expressed in the articles are those of the original authors own and are not necessarily the views of Crypto News. We do actively check all our content for accuracy to help protect our readers. This article content and links to external third-parties is included for information and entertainment purposes. It is not financial advice. Please do your own research before participating.