Crypto Lender Celsius Network Files for Bankruptcy
The cryptocurrency lending company Celsius Network, which is based in the United States, said on Wednesday that it has filed for bankruptcy in the state of New York. The company is the latest casualty in the cryptocurrency industry of the significant drop in token values. Last month, New Jersey-based Celsius blocked withdrawals, claiming “extreme” market circumstances as the reason. This prevented individual investors from having access to their assets and caused tremors to spread across the cryptocurrency market.
Celsius assessed the value of its assets and liabilities to be between $1 billion and $10 billion in a court filing submitted to the United States Bankruptcy Court for the Southern District of New York. Celsius reported having more than 100,000 creditors. The available cash for the corporation is in the amount of $167 million.
Alex Mashinsky, one of the co-founders of Celsius and the business’s current Chief Executive, said that “this is the correct move for our community and company.” During the COVID-19 epidemic, crypto lenders like as Celsius had a boom, luring depositors with high interest rates and rapid access to loans, both of which are features that regular banks very seldom provide. They made a profit by lending tokens to largely institutional investors and pocketing the difference between the two prices.
The business model of the lenders, however, has come under investigation after a strong sell-off in the cryptocurrency market in May, which was prompted by the failure of key tokens such as terraUSD and luna. This month, another United States-based cryptocurrency lender, Voyager Digital Ltd., declared bankruptcy after temporarily halting withdrawals and deposits. This month, withdrawals have also been frozen at the Singaporean financial institution Vauld, which is a smaller lender.
Celsius stated in a statement that it was not demanding power to enable client withdrawals, and the company added that it had sought the court for permission to continue activities, such as paying workers. The decision made by Celsius in June to put a hold on withdrawals led state securities authorities in the states of New Jersey, Texas, and Washington to open investigations against the companies.