Crypto lender Celsius Network has filed for Chapter 11 bankruptcy in a New York court, the company announced on Wednesday.
It came only a day after Vermont’s state financial regulator said that the troubled crypto company is 'deeply insolvent' and lacks assets and liquidity to repay account holders and creditors.
The crypto company’s troubles surfaced when it paused withdrawals on June 12, citing a volatile market, and then hired restructuring experts for advice on financials. It even had a few job cuts in between.
“Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps and transfers on its platform to stabilize its business and protect its customers,” said the members of the special committee of the Board of Directors.
“Without a pause, the acceleration of withdrawals would have allowed certain 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.”
The company has detailed that it has $167 million in cash on hand, which will be used to carry out certain operations during the restructuring process. In addition, it requested the court for permission to continue operations in the normal course.
Not Resuming Withdrawals
However, Celsius highlighted that it will address customer claims through the bankruptcy proceedings and will now ask the court to resume withdrawals.
“This is the right decision for our community and company,” said Celsius’ Co-Founder and CEO, Alex Mashinsky, who once wanted to educate US regulators about the business model of crypto lenders.
“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.”
Meanwhile, the California regulator has initiated an investigation against crypto firms offering interest-bearing accounts but did not name any specific companies.
