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Crypto lender Celsius files for bankruptcy, still won’t let users withdraw funds

Celsius CEO Alex Mashinsky speaks at a conference while seated on a stage and wearing a T-shirt that says,
Enlarge / Celsius CEO Alex Mashinsky addresses the audience at the November 2021 Web Summit in Lisbon, Portugal.

Getty Images | SOPA Images

Cryptocurrency loan company Celsius filed for bankruptcy under Chapter 11 yesterday, one month after the lender announced it was suspending withdrawals. The petitions for reorganization give Celsius “the best opportunity to stabilize the business, consummate a comprehensive restructuring transaction that maximizes value for all stakeholders, and emerge from Chapter 11 positioned for success in the cryptocurrency industry,” the company said.

In an FAQ updated yesterday, Celsius told users that withdrawals are still suspended. As part of the bankruptcy process, Celsius said it “intend[s] to put forward a plan that restores activity across the platform.” But it offered no timeline for allowing withdrawals and other suspended transactions again:

On June 12, 2022, we made the difficult but necessary decision to pause withdrawals, Swap, and transfers on our platform to stabilize our business and protect our customers.

Most account activity will be paused until further notice. Withdrawals, Swap, and transfers between accounts will remain paused, and rewards will stop accruing as of the date of the filing. Celsius is not requesting authority [from the bankruptcy court] to allow customer withdrawals at this time.

Existing loans “will continue to be serviced” but “Celsius will not be issuing new loans at this time,” the company said. Celsius also said that if it hadn’t halted withdrawals, “the acceleration of withdrawals would have allowed specific customers—those who were first to act—to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they receive a recovery.”

Celsius was slamming its critics and claiming optimism about its future shortly before it suspended withdrawals. Celsius cofounder and CEO Alex Mashinsky blasted what he called “FUD and misinformation” in a tweet on June 11, asking a critic, “do you know even one person who has a problem withdrawing from Celsius?”

Assets, liabilities, and creditors

Celsius said in a court filing that it has assets between $1 billion and $10 billion, liabilities between $1 billion and $10 billion, and over 100,000 creditors. In a bankruptcy case, a creditor is an entity that had a claim—a right to payment or other remedy—against the debtor at or before the time of the filing.

The court filing’s section for “estimated number of creditors” includes various checkboxes, with “more than 100,000” being the largest option available. The Celsius website boasts that “1.7 million people call Celsius their home for crypto.”

As the Financial Times notes, Celsius is the latest in “a wave of digital asset companies that have frozen assets and entered restructuring amid a sharp sell-off in cryptocurrencies this year.” Crypto hedge fund Three Arrows Capital filed for bankruptcy on July 1, while crypto lender Voyager Digital filed for bankruptcy on July 6.

A press release said Celsius has $167 million in cash on hand “to support certain operations during the restructuring process.” The company’s filings in US Bankruptcy Court for the Southern District of New York “include requests to pay employees and continue their benefits without disruption, for which the Company expects to receive Court approval… Customer claims will be addressed through the Chapter 11 process,” Celsius said.

Celsius also said it’s sorry for the lack of communication since suspending withdrawals. “We apologize that communication with our teams and community has been very limited over the past few weeks, and we look forward to being able to offer greater transparency with everyone through our reorganization, which encourages dialogue with all stakeholders,” Celsius said.

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