Celsius stood out as better than a bank. Now the crypto company is filing for bankruptcy.
Celsius Network applied for bankruptcy protection on Wednesday after a “crypto winter” – or crash – that decimated the value of digital currencies including bitcoin and ethereum. The company said most accounts will continue to be “pause until further notice.”
Celsius is the third crypto-related company to request bankruptcy protection in two weeks. It follows Three Arrows Capital and lends Voyager Digital in seeking financial restructuring after digital currencies plummeted. Celsius marketed itself as a type of crypto bank, and encouraged people to deposit their digital currencies with the company, and then make money by either borrowing or lending against the crypto deposits.
Problems for Celsius’ customers then started the network stops trading and other activities last month in the midst of crypto-breakdown, effectively blocking customers from accessing their money. The decision shocked customers who had been told by Celsius that the platform was low-risk and secure, while providing earnings as high as 17%. In his sales speech, Celsius promised “Your interests are our top priority” and stressed that traditional banking “is ruined.”
After applying for Chapter 11 bankruptcy protection on Wednesday, Celsius said most of the account activity “will be suspended until further notice.”
It added, “Withdrawals, exchanges and transfers between accounts will remain paused, and rewards will stop accumulating from the filing date. Celsius does not request a power of attorney to allow customer withdrawals at this time.”
In other words, customers still do not have access to their money, and it is unclear whether Celsius depositors will get their money back, or which customers will get their money back first. Cyptocurrency lenders are not regulated as banks, so there is no deposit insurance.
“Now I can be homeless”
The company’s terms of use warn that if Celsius seeks bankruptcy, the processing of customers’ digital assets is “unsettled, not guaranteed, and could result in a series of outcomes that are impossible to predict reliably.”
“We will never get our money back,” wrote a Twitter user in response to a tweet from Celsius announcing the bankruptcy petition. Another Twitter user replied: “Deposited my crypto and took out an emergency loan literally MONTHS ago. An emergency… now I could be homeless. Thanks Celsius.”
In a statement, Celsius said the cessation of trade was necessary because without it “the acceleration of withdrawals would have allowed certain customers – those who were the first to trade – to be paid in full while others let others wait for Celsius to reap value. from illiquid or long-term asset distribution activities before recovering. “
Conversion plan
By filing for bankruptcy, Celsius said it “intends.”[s] to present a plan that restores cross-platform activity, returns value to customers, and provides choices. “
The company has $ 167 million in cash on hand, which it said is enough to pay for “certain operations” when it is restructured. Its first goal is to receive legal approval to continue to pay employees and provide their benefits without interruption, it added.
The bankruptcy filing shows the company’s 50 largest creditors, the largest being Pharos USD Fund, a crypto fund, with $ 81 million in unsecured claims. Other creditors include the crypto trading group Alameda Research LTD and the crypto brokerage house Covario AG.
