Troubled Crypto Lender Celsius Files For Chapter 11 Bankruptcy Protection
Exactly 32 days after suspending withdrawals and transfers between accounts due to liquidity issues, cryptocurrency lending platform Celsius has filed for voluntary Chapter 11 bankruptcy protection.
Celsius Goes Bankrupt
Companies usually file for Chapter 11 bankruptcy when they cannot pay their debts. However, the filing allows the firm to stay in business under a reorganisation plan.
The troubled crypto lender announced the filing in a Thursday press release, noting that bankruptcy protection will help it in its restructuring process.
“This is the right decision for our community and company… 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,” Alex Mashinsky, Co-Founder & CEO of Celsius, said.
Celsius Hires New Restructuring Lawyers
Earlier this month, CryptoSavingExpert reported that the company hired new restructuring lawyers to counsel on options such as a restructuring plan and bankruptcy filing. The crypto lender had replaced the Philadelphia-based Akin Gump Strauss Hauer & Feld LLP law firm with Chicago-based Kirkland & Ellis LLP.
Although Celsius will not resume customers’ withdrawals at this time, the firm has filed a series of court motions to allow it to proceed with its business operations.
The motions include proposals to pay workers and maintain their benefits without disruption, and the company anticipates the court’s approval. Also, the crypto lender disclosed that it has $167 million in cash, which will fund operations during the restructuring process.
Furthermore, members of the Special Committee of the Board of Directors believe that Celsius’ move to halt withdrawals prevented a further crisis. They noted that if the decision was not made, some customers who acted first would have been paid in full, leaving others behind.
“Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilise its business and protect its customers,” they stated.
Celsius Repays Crypto-backed Loans
Since the company halted withdrawals, it has been trying to repay its crypto-backed loans to crypto lenders, such as Tether, Maker, Aave, and Compound, to reclaim its collateralized assets.
Celsius has now joined a growing list of crypto-related companies that have filed for bankruptcy, including crypto broker Voyager Digital and crypto hedge fund Three Arrows Capital.
~ By William A. Frederick ~
