Fighting cryptocurrency lender Celsius informs state regulators that they are filing for bankruptcy “immediately,” the source said
Celsius was sued on Thursday by former investment manager Jason Stone, as the pressure continues to increase on the company in the middle of a crash in cryptocurrency prices. Among other things, Stone has claimed that Celsius boss Alex Mashinsky (above) was “able to enrich himself considerably.”
Piaras Ó Mídheach | Sports file for Web Summit | Getty pictures
The crypto company Celsius is about to file for Chapter 11 bankruptcy, according to a source familiar with these discussions.
The company’s lawyers notified individual U.S. state regulators from Wednesday night, according to the source, who asked not to be named because the case was private. Celsius plans to file the papers “immediately,” the person said.
The Hoboken, New Jersey-based company made headlines a month ago after freezing customer accounts, blaming “extreme market conditions.”
The news marks the latest high-profile crypto-bankruptcy as prices plummet.
Voyager applied for Chapter 11 bankruptcy protection last week, after suffering losses due to exposure to the now defunct hedge fund Three Arrows Capital. A New York bankruptcy judge froze the fund’s remaining assets this week. Three Arrows is now in the liquidation process.
“Unfortunately, this was expected. It was expected. However, that does not stop our investigations. We will continue to investigate the company and work to protect customers, even through its insolvency,” said Joseph Rotunda, director of enforcement at Texas. Statens verdipapirnemnd.
Celsius did not immediately respond to CNBC’s request for comment.
The company was one of the largest players in crypto lending with more than $ 8 billion in loans to customers and almost $ 12 billion in assets under management from May. Celsius said it had 1.7 million customers as of June. The company offered interest-bearing crypto accounts with a return as high as 17% deposit.
The company was sued last week by a former investment manager who claimed that Celsius failed to hedge risk, artificially inflated the price of its own digital currency and engaged in activities that constituted fraud.
Six state regulators have started investigations of Celsius. Vermont was the last to do so earlier on Wednesday. The government’s department for financial regulation said that Celsius “disposed of customer funds in a number of risky and illiquid investments, trading and lending activities.”
“Celsius customers did not receive critical disclosures about their financial condition, investing 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 outstanding liabilities.”
