Celsius Network, one of the world’s largest crypto lenders, has filed for bankruptcy, following a wave of digital asset firms that have frozen assets and begun restructuring amid the global financial crisis. Cryptocurrencies sell off sharply this year.
The Hoboken, New Jersey-based company’s Chapter 11 bankruptcy filing in federal court in New York was filed in about a month. Freeze client assetsattracted billions of dollars across more than a million accounts.
Court records list assets between $1 billion and $10 billion, the same debts, and more than 100,000 creditors.
Like electronic money has declined in value by 2022, lenders offering high-yield crypto loans have faced cash shortages and customer buybacks, putting them in a state of disrepair. shaky finances. Some responded by blocking customer withdrawals, raising funds at a difficult rate, or participating in restructuring proceedings.
Poison said the filing would be an “opportunity to stabilize the business” and undergo a restructuring “to maximize value for all stakeholders”.
“Today’s submission follows Celsius’s difficult but necessary decision last month to halt withdrawals, swaps and transfers on its platform to stabilize business and protect customers. its,” a special committee of Celsius’s board of directors said in a press release.
If Celsius were not restricted from withdrawing, they said they would have to go through a run of their deposits effectively. The first customers to withdraw their assets will be paid in full, leaving others with illiquidity and limited claims, the company said.
“This is the right decision for our community and company,” Celsius chief executive Alex Mashinsky said in the press release.
Lenders like Celsius took customers’ deposits and made loans at higher interest rates, profiting from the difference. To attract investors, Celsius has offered high interest rates and asserted its risks are small. But, as Financial Times reported in an investigationCelsius has taken on increased financial risk in recent months as demand for loans from institutional investors has weakened.
Other major digital lenders also faced a similar fate amid a sharp crypto sell-off and the collapse of a highly leveraged crypto hedge fund, Three Arrows Capital, filed for bankruptcy this month.
Cryptocurrency lender Voyager Digital also filed for bankruptcy recently. Some companies have narrowly avoided a similar fate by taking emergency cash at exploding prices.
BlockFi agreed a rescue deal with crypto exchange FTX on July 1, valuing the lender at up to $240 million, well below its previous valuation of $4 billion.
The failure of Celsius similarly caused venture capitalists to incur huge losses. At the end of 2021, it raised $750 million from WestCap and Quebec-based Caisse de Đépôt et position du Québec pension fund at a valuation of more than $3 billion.
Kirkland & Ellis is serving as legal counsel to Celsius, while Centerview Partners is a financial advisor.
Alvarez & Marsal, a consulting firm best known for dismantling the failed investment bank Lehman Brothers after the 2008 financial crisis, is Celsius’s restructuring advisor.