The third significant cryptocurrency company in two weeks to declare bankruptcy is Celsius.
The third well-known cryptocurrency company to do so in the past two weeks is the crypto lender Celsius Network, which announced Wednesday night that bankruptcy proceedings had been opened.
According to the Chapter 11 bankruptcy petition submitted by the New Jersey-based company to the Southern District of New York, it has assets worth $167 million that it intends to use to support operations throughout the restructuring.
In a statement, Celsius co-founder and CEO Alex Mashinsky asserted that this will go down in history as a pivotal time.
Following the demise of Terra's algorithmic stablecoin UST, crypto lending and brokerage firms have encountered solvency issues, frequently as a result of investing in Terra coins directly (LUNA, UST), lending money to companies that did, like the now-bankrupt hedge fund Three Arrows Capital, or simply losing money from other risky positions involving leverage.
The company follows Three Arrows Capital and another lender, Voyager Digital, on the list of significant cryptocurrency companies declaring bankruptcy protection.
Celsius offered high-yield savings accounts to both retail and institutional users, living up to its motto of "Unbank Yourself." By lending its assets to hedge funds or utilizing extra leverage in higher risk decentralized finance trades, the company generated yield for its clients.
This illustration, created on July 7th, 2022, features the Celsius logo and a depiction of cryptocurrency. Illustrations by Dado Ruvic for Reuters
On June 12, Celsius displayed its first indications of stress by blocking user accounts on its platform. In some cases, this resulted in users losing money since they were unable to settle crypto loans on the site when market circumstances deteriorated.
The company hasn't said much since suspending clients' accounts and declaring bankruptcy.
According to Yahoo Finance, Celsius paid off at least $900 million in debt over the course of the previous month by hiring restructuring attorneys, firing 150 workers, and dissolving a number of decentralized finance jobs.
The company claimed in the petition that it had more than 100,000 clients who would be considered unsecured creditors in a bankruptcy situation and that it has assets and corresponding liabilities on a consolidated basis.
One Pharos USD FUND, which owes the trading company Alameda Research $12.7 million and $81 million respectively, is Celsius's biggest unsecured creditor.
According to a recent analysis by the blockchain analytics company Arkham Intelligence, Celsius gave KeyFi control of $530 million in corporate funds so that it may engage in riskier decentralized finance trading techniques.
According to Jason Stone, who recently sued Celsius, the sale caused the business to lose $350 million. Legal counsel for Stone alleged that Celsius was a Ponzi scheme and a "fraud."
After declaring bankruptcy, the celsius token (CEL) lost more than 32% of its value, trading at 46 cents a coin at the beginning of May before changing hands for $2 per coin.