Embattled crypto lender Celsius files for Chapter 11 bankruptcy

Celsius Network filed for Chapter 11 bankruptcy on Wednesday after the struggling crypto lender halted customer withdrawals facing insolvency. Celsius presents its bankruptcy as a restructuring rather than a liquidation.

why is it important: The firm is just one of several platforms in crisis amid the great deleveraging that marks this crypto winter, leaving their customers – many of whom were ordinary people lured by promises of ultra-high returns from the business – in trouble.

  • New Jersey-based Celsius Network Inc. and its units have all filed for bankruptcy protection in the Southern District of New York.

Celsius has more than 100,000 creditors, seemingly from all over the world.

  • The largest of these is the Cayman Islands-based Pharos USD Fund with a claim of around $81 million.
  • ICB Solutions, based in Ohio, and Caen Group LLC, based in California, each have a claim on just over $13 million.
  • FTX’s Alameda Research has a claim of nearly $13 million.
  • All claims of Celsius’ 50 largest creditors are presented as “unliquidated”, unlike Voyager Digital.

What they say: Celsius, through its Chapter 11 proceeding, is seeking “the opportunity to stabilize its business and complete a comprehensive restructuring transaction that maximizes stakeholder value.”

  • It remains to be seen whether stakeholders also refer to their customer base of around 300,000 active users with account balances above $100.

And after: The filings refer to CEO Alex Mashinsky’s statement, but it has not yet been submitted.

Backtrack: The bankruptcy filing was filed hours after Celsius repaid its last major outstanding DeFi loan, seeking to recover approximately $1 billion in collateral.

  • On-chain activity showed a wallet associated with Celsius paying $50 million in DAI, MakerDAO’s dollar-pegged stablecoin, to lender Defi Compound.

Catch up fast: Many crypto stores have been strained as the massive debt piled up in the crypto ecosystem grew as coin prices plummeted, prompting companies to lay off employees, some cutting staff up to 45%.

  • More than a dozen companies have downsized, including Coinbase Inc., Crypto.com, Winklevoss twins’ Gemini, Coinbase-backed Vauld, BitMex and BitOasis.
  • Crypto lenders, including Voyager Digital, which was the first to file for Chapter 11 bankruptcy protection, have either halted customer withdrawals or shut down services. Others include CoinFlex, which is embroiled in a dispute with bitcoin evangelist Roger Ver over an alleged unpaid loan.
  • Just days ago, a judge froze the assets of Three Arrows Capital, saying only appointed liquidators have the power to “transfer, encumber or otherwise dispose of any assets of the debtor located within the territorial jurisdiction of the United States.” “.

Between the lines: A lawsuit against Celsius filed by its former investment manager last week accused the crypto lender of being a “Ponzi scheme” that allegedly used customer deposits to engage in risky DeFi strategies.

  • Celsius is asking that its utility providers, including AT&T, Spectrum and Verizon Wireless, be prohibited from modifying, denying or discontinuing service or requiring additional assurance of payment.

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