Crypto Lender Celsius Filed for Chapter 11 Bankruptcy

After weeks of speculation, crypto lender Celsius finally filed for Chapter 11 bankruptcy. Celsius is the latest casualty of the bearish winter, which has so far wiped over $2 trillion from the crypto market space. The crypto lender has now joined other industry’s big names like Voyager Digital and Three Arrows Capital to file for bankruptcy.

Celsius, which reportedly has over 100,000 creditors, believes this is the right thing to do as the company is working to stabilize its business and make good on its promises to stakeholders. Celsius bankruptcy filing was done in the Southern District of New York.

Celsius, a leading cryptocurrency lender, was estimated to have generated over $20 billion in assets by offering depositors interest rates as high as 18%. Unfortunately, the company stopped withdrawals in June amid a panic run by clients. According to the latest statement from the company, Celsius has estimated assets and liabilities between $1 billion to $10 billion.

Celsius financial woes signal the problems confronting the digital asset space, where aggressive interest rate hikes have sent investors fleeing, leading to the collapse of hedge funds and lenders. It will be recalled that Voyager Digital, another top crypto lender filed for Chapter 11 bankruptcy protection earlier this month. Also, liquidators have been approached for failed crypto hedge fund Three Arrows Capital.

Doubts about the insane yield-backing products offered by Celsius and other crypto lenders intensified after the Terra ecosystem collapsed in May. Meanwhile, another centralized lender Babel has stopped withdrawals amid falling crypto prices, with top digital assets like Bitcoin and Ethereum losing more than 70% value from their all-time high.

Celsius’s business model hovers around loaning crypto borrowed from customers to institutional investors. The company also participated in many Defi projects.

According to a statement released by Celsius on Wednesday, the company stated that it needed to stop withdrawals because, without it, there would have been an insane request for withdrawals. Means those who acted first will be paid in full, while others will have to wait for the company to redeem value from liquid and long-term assets before they are paid.

It remains to be seen whether or not Celsius weathers the storm.

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