Crypto lender Celsius files for Bankruptcy

Crypto lender Celsius files for bankruptcy

Celsius, Cryptocurrency investment platform has announced to have filed for bankruptcy in the US on 13th July 2022, just a month after it checked withdrawals from its platform, in the latest sign of an industry in chaos.

Celsius suspended withdrawals in mid-June, stated that it was looking for restructuring in a way that would take full advantage of value for all stakeholders. It further informed that it had $167 million of cash available meanwhile to meet urgent needs.

In the United States, a company that is unable to pay its debts to restructure away from its creditors, Chapter 11 allows it while continuing its current operations.

The company had paused all withdrawals and some other functions in mid-June, citing "extreme market conditions which had amassed more than $20 billion in assets. It offers interest rates as high as 18% to customers, deposited their cryptocurrencies."

The Federal Reserve increases rates of interest aggressively, hence Cryptocurrency platforms have come under growing pressure of reacting to risk sentiment and crushing funding costs. Voyager Digital Ltd., Crypto broker, filed for Chapter 11 bankruptcy protection early July 2022, while liquidators have required bankrupt crypto hedge fund, Three Arrows Capital. Due to a cash crunch, other companies have postponed withdrawals, like CoinFlex and Babel Finance.

Celsius stated that pause a "difficult but necessary decision." Without a break, it said, "The acceleration of withdrawals would have allowed certain customers, those who were first to act, to be paid in full while leaving others behind to wait for Celsius to yield value from illiquid or longer-term advantage placement activities before they receive a retrieval."

Alex Mashinsky, co-founder and CEO of Celsius stated, "This is the perfect decision for our community and company." "I can assert that when we recall the olden times of Celsius, we will see this as an important moment, where acting with resolution and assurance served the community and supported the future of the company."

To customers willing to lend out their crypto, Celsius promised produces of more than 18 percent. In a slew of decentralized-finance claims, it borrowed those coins to institutional investors, but was a participant as well.