Cryptocurrency lender Celsius has begun filing for Chapter 11 bankruptcy protection after a month of turmoil, in a development that is the latest blow to the struggling digital asset industry.
In a statement issued Wednesday, Celsius noted that it will seek to stabilize its business through restructuring in a way that “maximizes value for all shareholders.” Celsius added that it has $167 million in cash to support the continuation of its activities in the interim.
Earlier on Wednesday, CNBC reported, citing a source with knowledge of the matter who spoke on condition of anonymity, that the company’s lawyers have begun informing US regulators of the development.
“This is the right decision for our community and our company,” Alex Mashinsky, co-founder and CEO of Celsius, said in a statement. a defining moment, where acting with determination and confidence serves the community and strengthens the company’s future.”
The Hoboken, New Jersey-based company hit the headlines a month ago after it “frozen” its customer accounts, which it attributed to “extreme market conditions.”
The company has more than 100,000 creditors, which could include both customers and counterparty lenders, according to the bankruptcy filing. Its largest unsecured claim is $81 million from the Cayman Islands-based Pharos Fund. The bankruptcy filing also lists as a creditor the company of billionaire Sam Bankman-Fried, founder of FTX and Alameda Research, with an unsecured loan of $12 million.
The news about Celsius is the latest high-profile bankruptcy in the cryptocurrency space, which is in the middle of a “storm”.
It is recalled that Voyager also filed for bankruptcy last week, following the losses it suffered due to its exposure to the now-defunct hedge fund Three Arrows Capital. Also, a New York bankruptcy court this week “froze” the remaining assets of Three Arrows Capital, which is now in liquidation.
What is Celsius?
Celsius is one of the biggest players in the cryptocurrency lending space, with more than $8 billion in loans to customers, and as of May, it had nearly $12 billion in assets under management. According to her, by June she had 1.7 million customers.
Its main business is lending its customers’ cryptocurrencies to counterparties who are willing to pay high interest rates in order to borrow, with the company then sharing a portion of its revenue with its customers.
However, its activity collapsed amid the liquidity crisis that has recently hit the cryptocurrency market.
“Unfortunately, this was to be expected. And next. However, it does not stop our investigations. We will continue to investigate the company and work to protect its customers, even in the midst of its insolvency,” said Joseph Rotunda, head of enforcement of the Act to the Texas State Securities Board regarding Celsius’ bankruptcy filing.
The company did not immediately respond to CNBC’s request for comment.
It is noted that six regulatory authorities have already launched investigations against Celsius. Vermont’s regulator is the latest to launch an investigation into the firm, saying Celsius “deployed client assets in a variety of risky and illiquid investments, transactions and lending activities.”
“Celsius’ customers did not receive critical disclosures about their financial condition, investment activities, risk factors and ability to repay their obligations to depositors and other creditors,” the Vermont regulator said in a statement. “The company’s assets and investments are probably insufficient to cover its outstanding obligations,” he added.
Source: Capital
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