Crypto lender Celsius has officially filed for bankruptcy in a New York court (USA). Court filing shows Celsius actively declared Chapter 11 bankruptcy, which allows the company to stay in business and restructure its obligations. Celsius listed estimated assets and liabilities in the range of $1 billion to $10 billion, of which only $167 million is in cash.
Celsius currently has more than 100,000 creditors, including large organizations such as Pharos USD Fund SP/Pharos Fund S, Alameda Research, ICB Solutions, The Caen Group LLC, Alameda Research, B2C2, Covario AG and many individual users. As of May 2022, Celsius was reported to be one of the biggest crypto lenders in the crypto industry, managing deposits of up to 12 billion USD and lending more than 8 billion USD, supporting a total of 1.7 million customers.
Celsius is the third crypto firm to declare bankruptcy in July 2022, after the hedge fund Three Arrows Capital (July 2) and the crypto broker Voyager Digital (July 6). All of them filed for bankruptcy in New York court.
The reason behind Celsius’s underperformance is mainly from the fact that it converted the majority of user deposits to stETH – the token that locks ETH on Lido Finance, which has poor liquidity. The strong correction of the crypto market in early June, and the sharp drop in the price of stETH, had led to massive withdrawals of users on the network. Celsius then had to block all trading/deposit/withdrawal activities from June 13 until now.
Celsius then did not reveal much about the company’s business situation, only stating that it still needs more time to stabilize its liquidity and asked users to be patient. Recently, this crypto firm continues to face negative news such as CEO Alex Mashinsky attempting to flee the U.S.; Celsius being refused rescue by FTX for allegedly “losing $2 billion”; or ex-employee accused Celsius of manipulating the market with a ponzi scheme – It all makes things worse.
Since the beginning of July, Celsius has repaid around $800 million in stablecoins borrowed from DeFi protocols Aave, MakerDAO, and Compound. In return, the company withdrew $440 million in WBTC collateral from Maker, $124 million in WBTC and $417 million in WETH from Aave and, most recently, $200 million in WBTC from Compound. Celsius’s CEL token price fell nearly 45% after the company’s bankruptcy announcement.
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