The beleaguered cryptocurrency lending platform, Celsius Network, which last month froze all user withdrawals and transfers, has now filed for bankruptcy protection.
(Sign up to our Technology newsletter, Today’s Cache, for insights on emerging themes at the intersection of technology, business and policy. Click here to subscribe for free.)
The company announced it started financial restructuring and had filed voluntary petitions for reorganisation under Chapter 11 of the U.S. Bankruptcy Code, in New York.
A company statement confirmed that Celsius had “$167 million in cash on hand” to carry out some operations during the restructuring phase.
However, Celsius said it was not currently addressing the matter of frozen customer withdrawals, but rather following the Chapter 11 process.
“We have a strong and experienced team in place to lead Celsius through this process. I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company,” said Celsius co-Founder and CEO Alex Mashinsky in an official release.
The executive stressed this was the “right decision” for the community and the company.
The news comes as Vermont’s Department of Financial Regulation (DFR) said it believed Celsius to be “deeply insolvent.” Several other U.S. state regulators were investigating the platform as well.
Celsius’ shock decision last month to freeze all user withdrawals and transfers meant that around 1.7 million users could not access their funds, in a huge blow to the growing market for crypto lenders.
The crypto sector’s liquidity shortage was also thrown into sharp relief this quarter as falling Bitcoin and Ether prices prompted numerous investors to pull their investments from exchanges.
The sector is still reeling from the effects of the TerraUSD [UST] stablecoin and LUNA coin collapse, which triggered a market meltdown, mass layoffs at large exchanges, and investor losses in the billions of dollars.
Several other crypto lenders halted user transfers, while a crypto hedge fund was forced into liquidation.
Celsius’ legal journey to earn back investors’ and regulators’ trust could hint at how other flailing companies might fare in the future.
