Crypto lender Celsius files for bankruptcy in New York
Celsius Network, one of the world’s largest cryptocurrency lenders, has filed for bankruptcy, following a wave of digital asset companies that froze assets and began restructuring amid a sharp sale of cryptocurrencies this year.
The Hoboken, New Jersey-based company’s Chapter 11 bankruptcy filing in federal court in New York comes about a month after it froze customer assets, trapping billions of dollars in more than a year. million accounts.
The court filing listed between $1 billion and $10 billion in assets, the same amount of liabilities, and more than 100,000 creditors.
As cryptocurrencies plunged in value in 2022, lenders offering high-yield crypto loans faced cash shortages and customer buyouts, putting them on a fragile financial footing. Some reacted by blocking customer withdrawals, raising funds at ridiculous prices or initiating restructuring proceedings.
Celsius said its filing would be an “opportunity to stabilize its business” and undergo a restructuring “that maximizes value for all stakeholders”.
“Today’s filing follows Celsius’ difficult but necessary decision last month to suspend withdrawals, trades and transfers on its platform to stabilize its business and protect its customers,” a committee said. special from the Celsius Board of Directors in a press release.
If Celsius hadn’t restricted withdrawals, he said he would indeed have experienced a run on his deposits. Customers who would have been the first to withdraw their assets would have been paid in full, leaving others with illiquid and less certain claims, the company said.
“This is the right decision for our community and our business,” Celsius Chief Executive Alex Mashinsky said in the press release.
Lenders such as Celsius took deposits from customers and loaned out the funds at higher interest rates, making a profit on the difference. To attract investors, Celsius offered high interest rates and claimed that its risks were low. But, as the Financial Times reported in an investigation, Celsius has taken on increased financial risk in recent months as demand for loans from institutional investors has waned.
Other big digital lenders have suffered a similar fate amid a sharp sell-off in cryptocurrencies and the implosion of highly leveraged crypto hedge fund Three Arrows Capital, which filed for bankruptcy this month. -this.
Crypto lender Voyager Digital also filed for bankruptcy recently. Some companies narrowly avoided a similar fate by taking emergency cash at knock-down prices.
BlockFi agreed to a bailout deal with crypto trading exchange FTX on July 1, which valued the lender at up to $240 million, well below an earlier valuation of $4 billion.
Celsius’ failure is also poised to leave venture capital backers with heavy losses. At the end of 2021, it raised $750 million from WestCap and the Quebec pension fund Caisse de depot et placement du Quebec for a valuation of more than $3 billion.
Kirkland & Ellis is Celsius’s legal advisor, while Centerview Partners is its financial advisor.
Alvarez & Marsal, an advisory firm best known for unwinding the bankruptcy of investment bank Lehman Brothers after the 2008 financial crisis, is Celsius’ restructuring adviser.