Celsius Files for Bankruptcy — Regulator Says the Crypto Lender Is ‘Deeply Insolvent’
Another crypto lender, Celsius Network, has sought bankruptcy protection in the U.S. “Customer claims will be addressed through the Chapter 11 process,” the company said. Two other crypto firms recently filed for bankruptcy protection: Voyager Digital and Three Arrows Capital (3AC).
Celsius Follows Voyager, Files for Chapter 11 Bankruptcy
Crypto lender Celsius Network announced Wednesday that it has “filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.”
Alex Mashinsky, CEO and co-founder of Celsius, commented:
This is the right decision for our community and company.
The company stated that the bankruptcy filing aims “to provide the company with the opportunity to stabilize its business and consummate a comprehensive restructuring transaction that maximizes value for all stakeholders.”
Noting that it will continue to operate, the company explained: “Celsius has $167 million in cash on hand, which will provide ample liquidity to support certain operations during the restructuring process.”
Last month, Celsius paused withdrawals, swaps, and transfers on its platform. Its decision to freeze accounts has prompted the U.S. Securities and Exchange Commission (SEC) and several state regulators to probe the company.
According to Wednesday’s announcement:
Celsius is not requesting authority to allow customer withdrawals at this time. Customer claims will be addressed through the Chapter 11 process.
State Regulator Believes Celsius Is ‘Deeply Insolvent’
The Department of Financial Regulation of the U.S. State of Vermont is one of the state regulators investigating Celsius. The regulator asserted that the crypto firm has been engaged in an unregistered securities offering in multiple jurisdictions, including Vermont.
“Due to its failure to register its interest accounts as securities, Celsius customers did not receive critical disclosures about its financial condition, investing activities, risk factors, and ability to repay its obligations to depositors and other creditors,” the regulator detailed, adding:
The Department believes Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors.
Last week, crypto lender Voyager Digital also filed for Chapter 11 bankruptcy. The company cited “prolonged volatility and contagion in the crypto markets” and the default of crypto hedge fund Three Arrows Capital (3AC) on a loan as the reasons for its decision to file for bankruptcy protection.
What do you think about Celsius filing for Chapter 11 bankruptcy? Let us know in the comments section below.
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