Another crypto credit company is the victim of a crypto crash.
A month after freezing client assets due to turmoil in the crypto market, Celsius Network, one of the world’s largest cryptocurrency lenders, filed for bankruptcy protection.
As the bankruptcy court restructures the business, the crypto lending company hopes to continue operations using the remaining $167 million in cash, according to The edge.
According Tech CrunchCelsius Network said “the necessary decision to file for bankruptcy would give the company an opportunity to stabilize its business.”
(Photo: Celsius Network)
Customer withdrawals locked on Celsius network last month to avoid bank runs
Celsius Network’s filing indicates that the company has between $1 billion and $10 billion in assets. However, it appears the company owes a similar amount. Five of the largest claims are between $20 million and $80 million each.
According to TechCrunch, the Chapter 11 bankruptcy filing in federal court in New York shows it has more than 100,000 creditors.
According to Fortune, last year the company was valued at $3.25 billion. Prior to this year’s sale, Network Celsius managed up to $24 billion in assets.
However, the $24 billion asset reportedly dipped to around $12 billion before locking in client assets. The company has less now, as the bankruptcy filing suggests.
Celsius claimed that last month it blocked withdrawals to avoid a bank run.
According to the company’s press release, without a break, the acceleration of withdrawals would have allowed customers, the first to act, to be paid in full.
On the other hand, before receiving a trade-in, other customers will be left behind to wait for Celsius to recoup value from illiquid or longer-lived asset deployment activities.
Read also : Crypto Lender Celsius Network Under Investigation By Various States After Customer Transactions Freeze
Celsius co-founder and chief executive thinks the company would get through the process
Alex Mashinsky, co-founder and managing director of Celsius Network, said the company has a strong and experienced team to lead it through this process.
Celsius Network’s announcement that it is filing for bankruptcy follows weeks of speculation about the company’s financial strength.
The crypto lending company has created one of the biggest crypto banks. They offer better returns to customers and promise that the investment was less risky.
In fact, the company allowed users to deposit their Bitcoin, Ethereum, and Tether and receive weekly interest payments. The platform offers up to 18% interest per year, depending on the time horizon and the token.
According to TechCrunch, the company took big bets on untested companies and therefore lent to big crypto companies. Celsius Network took even greater risks last year as demand for new loans from institutional investors began to slow, according to TechCrunch.
Other digital lenders have also suffered the same fate as Celsius Network. This month, Three Arrows Capital also filed for bankruptcy as well as Voyager Digital, a top crypto brokerage.
In a press release, Celsius Network said a series of customary petitions had been filed with the court to allow the company to continue operating as normal.
However, the company is not seeking approval to allow customer withdrawal at this time, as customer complaints will be handled through the Chapter 11 process.
Related article: Crypto Lender Company Celsius Network Repays $120M Loan to Maker