Crypto lender Celsius files for bankruptcy, still won’t allow users to withdraw funds

Enlarge / Celsius CEO Alex Mashinsky addresses the audience at the November 2021 Web Summit in Lisbon, Portugal.

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Cryptocurrency lender Celsius filed for Chapter 11 bankruptcy yesterday, a month after the lender announced it was suspending withdrawals. The reorganization requests give Celsius “the best opportunity to stabilize the business, complete a comprehensive restructuring transaction that maximizes value for all stakeholders, and emerge from Chapter 11 positioned for success in the crypto industry.” currency”, the company said.

In a FAQ updated yesterday, Celsius told users that withdrawals are still on hold. As part of the bankruptcy process, Celsius said it “intends[s] to come up with a plan that restores activity across the entire platform.” But it offered no time frame to re-allow withdrawals and other suspended transactions:

On June 12, 2022, we made the difficult but necessary decision to suspend withdrawals, swaps and transfers on our platform to stabilize our business and protect our customers.

Most account activity will be suspended until further notice. Withdrawals, trades and transfers between accounts will remain paused and rewards will stop accumulating from the date of deposit. Celsius does not ask for permission [from the bankruptcy court] to allow customer withdrawals at this time.

Existing loans “will continue to be repaid” but “Celsius will not be issuing new loans at this time,” the company said. Celsius also said that if it hadn’t stopped withdrawals, “accelerating withdrawals would have allowed some customers – those who were the first to act – to be paid in full while leaving others to wait. that Celsius recovers value from illiquid or longer-lived asset deployment activities before they receive a clawback.”

Celsius lambasted critics and claimed optimism about its future shortly before suspending withdrawals. Celsius co-founder and CEO Alex Mashinsky blasted what he called “FUD and misinformation” in a Tweeter on June 11, asking a reviewer, “Do you even know anyone who’s having trouble withdrawing from Celsius?”

Assets, liabilities and creditors

Celsius said in a filing in court that it has assets between 1 and 10 billion dollars, liabilities between 1 and 10 billion dollars and more than 100,000 creditors. In a bankruptcy case, a creditor is an entity that had a claim – a right to payment or other recourse – against the obligor at or before the time of filing.

The court filing section for “estimated number of creditors” includes various checkboxes, with “over 100,000” being the largest option available. The Celsius website boasts that “1.7 million people call Celsius their home for crypto.”

Like the Financial Times Remarks, Celsius is the latest in a “wave of digital asset companies that froze assets and began restructuring amid a strong selloff in cryptocurrencies this year.” Three Arrows Capital Crypto Hedge Fund filed for bankruptcy on July 1, while crypto lender Voyager Digital filed for bankruptcy July 6.

A Press release said Celsius has $167 million in cash “to support certain operations during the restructuring process.” From the company deposits in the United States Bankruptcy Court for the Southern District of New York “includes demands to pay employees and continue their benefits without interruption, for which the company expects to receive court approval. Customer complaints will be handled through the Chapter 11 process,” Celsius said. .

Celsius also said he was sorry for the lack of communication since the suspension of withdrawals. “We apologize that communication with our teams and our community has been very limited over the past few weeks, and we look forward to being able to provide greater transparency with everyone through our reorganization, which encourages dialogue with all stakeholders,” Celsius said.

Janet E. Fishburn