Celsius Networks, a cryptocurrency lender, has filed for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York. Securities regulators in Texas, New Jersey and Washington had been looking into the business prior to its filing. The company has stated that it has $167 million in cash to cover short-term liquidity needs throughout the reorganization process, based on its projected assets and liabilities of $1 billion to $10 billion. According to the firm, the funds will be adequate for the company to continue operating and conclude the relevant procedures.
The implication of Celsius’ bankruptcy filing
Since it abruptly suspended deposits, swaps, and withdrawals earlier this month, the crypto lender has attracted much attention. Since then, the company has been working with reorganization attorneys to pay back its debtors. Celsius was a major player in the crypto industry and this filing will certainly result in significant losses. In June, the company said it had 1.7 million customers. Companies unable to pay their debts can use Chapter 11 filing to restructure away from their creditors and still run their business.
To stabilize its business and safeguard its customers from further harm, the firm halted swaps, deposits, and withdrawals. Without suspending withdrawals, the company believes it would have paid some customers in full. However, others would have been left waiting for illiquid or long-term assets to be sold.
“This is the right decision for our community and company,” said Alex Mashinsky, co-founder and CEO of Celsius. He believes this will be a defining moment in which acting with resolve and confidence helped the community and boosted the company’s long-term prospects.
Over the past month, major cryptocurrency companies have fallen victim to the crypto winter. After Three Arrows Capital (3AC), Vauld, and Voyager Digital, Celsius Network has entered the red territory. The network’s token has lost more than 10% of its value overnight. Days before the firm halted all withdrawals, Celsius’ CEO chastised detractors for disseminating misinformation about the company.