Crypto Lending Firm Celsius Network Files For Bankruptcy

By Kevin • July 15, 2022 5:57 pm • Comments

Crypto lending company Celsius Network drew a lot of attention from the crypto industry when it announced that it would pause all withdrawals from the platform.

This drew a lot of concern regarding the financial situation of the company and whether or not it would be able to provide the digital assets to their users.

As many speculators may have expected, it has been revealed that the company has now filed for bankruptcy which makes another firm that has been taken down by the recent crypto bear market.

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Regarding the latest status of its operations, the company plans to operate with the remaining $167 million cash reserves that it has while the bankruptcy court restructures the entire company.

TheVerge shares the details:

According to Celsius Network’s filing, the company has between $1 billion and $10 billion in assets but owes a similar amount.

The five largest claims range between $20 million and $80 million each.

The company was valued at $3.25 billion last year, according to Fortune, and managed as much as $24 billion worth of assets before this year’s sell-off.

That had reportedly dipped to around $12 billion before it locked withdrawals, but the bankruptcy filing suggests it has less now.

There have been… questions, to say the least, about Celsius’ business model and operations. We describe some of those here.

Celsius continues to state that it had halted withdrawals a month ago in order to prevent a bank run on the platform.

When a bank run happens, the ones that were quickest to act would be able to get most of their assets back while the rest of the users would have their assets stuck.

Celsius is not the only crypto lender that recently declared bankruptcy as Voyager Digital had also done the same previously.

As a result, the crypto lender’s business model has now come under scrutiny, especially after the collapse of the UST stable coin.

Reuters.com reports:

Another U.S. crypto lender, Voyager Digital Ltd (VOYG.TO), filed for bankruptcy this month after suspending withdrawals and deposits. Singapore’s Vauld, a smaller lender, also froze withdrawals this month. read more

Celsius said in a statement it was not requesting authority to allow customer withdrawals, adding it had asked the court to allow it to continue operations such as paying employees.

Celsius’s move in June to freeze withdrawals prompted state securities regulators in New Jersey, Texas and Washington to launch investigations into the firms.

With the persisting bear market, regulators may use this time as an opportunity to push for stricter regulation as many crypto businesses continue to struggle and do not have access to the same kinds of “bailouts” that traditional industries have.

It is reported that the company is still preventing users from withdrawing funds.

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