The troubled lending platform Celsius Network announced that it had filed for Chapter 11 bankruptcy in the US. The company stopped paying out balances, trading, as well as transfers a month ago, citing "extreme market conditions". As it turns out, however, investors' concerns regarding its solvency weren't unfounded.
Celsius Network has officially filed for Chapter 11 bankruptcy, according to an announcement by the firm. The development has been a long time coming, after several struggles to keep the company going following the market downturn. The lending platform believes that this is the best way to take the business forward and "aims to come out of bankruptcy stronger."
Moments ago, @CelsiusNetwork filed voluntary petitions for Chapter 11 protection and announced that the company initiated a financial restructuring. https://t.co/vf5wsT6TMp
— Celsius (@CelsiusNetwork) July 14, 2022
Chapter 11 bankruptcy in New York
The financial restructuring of the company was initiated in the United States Bankruptcy Court for the Southern District of New York; similar to the one crypto brokerage Voyager Digital requested. It marks the end of the prolonged struggle that Celsius has had and follows numerous actions taken by the company to keep the business afloat.
“This decision was made with the intention to provide 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 crypto industry.” - Announcement Celsius
Celsius said that it did have $167 million in cash to support certain operations during the financial restructuring. It has also brought new directors in to help with the process. Co-founder and CEO of Celsius Alex Mashinsky claimed that the move was the right one to make.
“This is the right decision for our community and company. 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.” - Alex Mashinsky, Celsius CEO
A new era for Celsius begins
For many years, Celsius was one of the most popular cryptocurrency lending platforms. The bankruptcy filing is a massive change and follows questionable risk management practices. The firm noted in a newly published FAQ that it would establish a plan that restores activity to the platform, which should bring some relief to customers. How many assets remain in Celsius' possession remains unclear.
The insolvency of the firm has made many headlines, which has, in turn, sparked regulatory scrutiny. Celsius will be hoping that it can make amends and fix itself as it begins the next phase of its existence. Investors and a former employee have also taken action against the company. The latter claimed that Celsius was running a Ponzi scheme and filed a lawsuit, while a crypto YouTuber has also taken legal action.
