The hammer has struck: Celsius Network, a New Jersey-based provider of cryptocurrency lending services, announced Wednesday that it has filed for Chapter 11 bankruptcy. After a series of declining price fluctuations on cryptocurrency which saw the crypto market bleed around 60% of the valuation in six months – and a number of miscalculated risks – the supplier says that the bankruptcy petition aims to enable a “comprehensive restructuring plan” for the benefit of “all stakeholders”. As is often the case, lenders of sharks and whales have begun to eat at the carnage before other, less leveraged investors do so.
According to the submission to the US Bankruptcy Court for the Southern District of New York, Celsius estimated his assets and liabilities to be in the order of $ 1 billion to $ 10 billion. The bankruptcy notice comes after the Decentralized Finance (DeFi) player froze all withdrawals, exchanges and transfers on its platform “to stabilize the business and protect its customers” on June 12. Interestingly, Celsius took much longer to freeze deposits, which led to some users’ funds being drawn towards the economic black hole after the freeze took place.
Celsius Mining, the company’s mining unit for cryptocurrency, which announced its intention to undergo an IPO as early as March this year, also filed for bankruptcy.
According to court documents, and after a series of high-profile payments to other cryptocurrencies, Celsius currently has approximately $ 167 million in liquidity against the $ 4,153,380,951.91 that the 1.7 million customers originally deposited. And just this Monday, July 12, Vermont’s Department of Financial Regulation said Celsius Network was “deeply insolvent and lacks the assets and liquidity to meet its obligations to account holders.” The writing was on the wall.
Laura Shin, a crypto-journalist and podcaster who wrote The cryptocurrencies, a book that analyzes the rise of crypto – and Ethereum in particular – told the Washington Post that Celsius “engaged in risky strategies to generate returns on depositors’ funds.” Celsius’ claim to fame rests on returns that could sometimes soar above 18% – only for users who deposit (in the crypto world, bet) their tokens with the service.
A former Celsius employee and CEO of the DeFi company KeyFi, Jason Stone, has already filed a lawsuit against the company, accusing it of facilitating a Ponzi scheme that aimed to – and succeeded in – manipulate the cryptocurrency market.
Celsius has separately issued a proposal to the court in New York requesting that it be allowed to continue operating “at a normal rate”, in order to bring in the profits that will allow it to pay employees and continue the benefits.
Celsius represents a pervasive problem in the crypto industry, where financial services that claim to be decentralized (as the name implies) are actually centralized entities, with the power to control the flow of crypto assets.
