https://sputnikglobe.com/20220714/crypto-lender-celsius-files-for-chapter-11-protection-after-halting-withdrawals-1097293337.html
Crypto Lender Celsius Files for Chapter 11 Protection After Halting Withdrawals
Crypto Lender Celsius Files for Chapter 11 Protection After Halting Withdrawals
Sputnik International
The cryptocurrency market as a whole has been in trouble for most of 2022, with stablecoins losing their peg to fiat currencies and a lack of liquidity hurting... 14.07.2022, Sputnik International
2022-07-14T03:29+0000
2022-07-14T03:29+0000
2022-07-14T03:25+0000
bankruptcy
crypto market
cryptocurrencies
chapter 11 united states bankruptcy code
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Crypto lender Celsius Network has filed for Chapter 11 bankruptcy protection, a little more than a month after the lender halted withdrawals from the site.CNBC first reported that the company was planning to file for bankruptcy early on Wednesday, and the news was confirmed by Celsius later in the day.Celsius previously offered investors a chance to make and take loans in cryptocurrencies, offering higher yields than a bank and, they claimed, less risk. However, the company overextended itself by making a series of large loans without enough collateral to back them up.The company, valued at $3 billion during its last venture funding round, started feeling the pinch when cryptocurrency prices plummeted in May after a popular stablecoin (a cryptocurrency designed to stay constant with the price of a fiat currency) TerraUSD lost its peg to the US dollar.In June, the company halted withdrawals and all trading on the site, leading to mass speculation that a rug pull or bankruptcy proceedings would be happening soon.Chapter 11 bankruptcy does not necessarily spell the end for Celsius, rather it means the company will be audited and restructured under the purview of the bankruptcy court and will be able to remain in operation during that time. In the news release, Celsius indicated they plan to use the money they have on hand to keep operations going and employees paid while it restructures.However, the company is not requesting the court allow them to open up withdrawals at this time. With traditional lending platforms, customers would be protected under federal deposit insurance. As unsecured creditors, they will instead be far down the list of creditors who are made whole.At this point, the best chance for customers to get their value back is for the restructuring to go well and for Celsius to manage to become a viable business again. The company says it has $167 million in cash on hand. It recently paid a $50 million loan back to Decentralized Finance (DeFi) loan platform Compound, allowing it to access $200 million in wrapped bitcoin and other cryptocurrencies it had tied up in the network as collateral.This marks the second cryptocurrency lending platform to declare Chapter 11 bankruptcy this month; Voyager Digital Ltd filed for Chapter 11 protection on July 6.Bitcoin did not seem to move much on the news, with its price back above $20,000 after a brief dip below that number earlier in the week.
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bankruptcy, crypto market, cryptocurrencies, chapter 11 united states bankruptcy code
bankruptcy, crypto market, cryptocurrencies, chapter 11 united states bankruptcy code
Crypto Lender Celsius Files for Chapter 11 Protection After Halting Withdrawals
The cryptocurrency market as a whole has been in trouble for most of 2022, with stablecoins losing their peg to fiat currencies and a lack of liquidity hurting lending platforms like Celsius.
Crypto lender Celsius Network has filed for Chapter 11 bankruptcy protection, a little more than a month after the lender halted withdrawals from the site.
CNBC first reported that the company was planning to file for bankruptcy early on Wednesday, and the news was confirmed by Celsius later in the day.
Celsius previously offered investors a chance to make and take loans in cryptocurrencies, offering higher yields than a bank and, they claimed, less risk. However, the company overextended itself by making a series of large loans without enough collateral to back them up.
The company, valued at $3 billion during its last venture funding round, started feeling the pinch when cryptocurrency prices plummeted in May after a popular stablecoin (a cryptocurrency designed to stay constant with the price of a fiat currency) TerraUSD lost its peg to the US dollar. In June, the company halted withdrawals and all trading on the site, leading to mass speculation that a rug pull or bankruptcy proceedings would be happening soon.
Chapter 11 bankruptcy does not necessarily spell the end for Celsius, rather it means the company will be audited and restructured under the purview of the bankruptcy court and will be able to remain in operation during that time. In the news release, Celsius indicated they plan to use the money they have on hand to keep operations going and employees paid while it restructures.
“This is the right decision for our community and company,” Alex Mashinsky, co-Founder & CEO of Celsius said in the company release. “We have a strong and experienced team in place to lead Celsius through this process. I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.”
However, the company is not requesting the court allow them to open up withdrawals at this time. With traditional lending platforms, customers would be protected under federal deposit insurance. As unsecured creditors, they will instead be far down the list of creditors who are made whole.
At this point, the best chance for customers to get their value back is for the restructuring to go well and for Celsius to manage to become a viable business again. The company says it has $167 million in cash on hand. It
recently paid a $50 million loan back to Decentralized Finance (DeFi) loan platform Compound, allowing it to access $200 million in wrapped bitcoin and other cryptocurrencies it had tied up in the network as collateral.
This marks the second cryptocurrency lending platform to declare Chapter 11 bankruptcy this month; Voyager Digital Ltd filed for Chapter 11 protection on July 6.
Bitcoin did not seem to move much on the news, with its price back above $20,000 after a brief dip below that number earlier in the week.
