Celsius has filed for bankruptcy protection a month after suspending all customer withdrawals and transfers The Wall Street Journal. The crypto lending giant denied nearly two million users access to their funds in June due to what it described as “extreme market conditions.” At the time, the company said that freezing payouts would help stabilize the liquidity of its assets to in turn help it meet payout obligations.
Celsius was one of the companies involved in the crypto crash and the value of its token fell from $7 a year ago to $3 by early April this year. Based on the most recent information from Coinbase, its token is now worth around 56 cents. As The diary Notes, Celsius offered its customers much better returns than traditional banks — over 18.6 percent on deposits — and made large loans backed by little collateral. That left the company with very little room to move as it felt the effects of the crypto downturn.
The crypto lender’s board of directors stated that pausing withdrawals is difficult but necessary. They said when they filed for bankruptcy:
“Without a pause, the acceleration of withdrawals would have allowed certain customers – those who traded first – to be paid in full, while others were left to wait for Celsius to extract value from illiquid or longer-dated assets before requesting a repayment receive .”
Because Celsius doesn’t seek court approval for withdrawals, they will likely remain inaccessible as the company restructures as part of the Chapter 11 process. While filing for bankruptcy protects Celsius from some enforcement action by regulators, it doesn’t prevent regulators from investigating the company. Texas State Securities Board Director of Enforcement Joseph Rotunda said the agency will continue its investigation into the crypto lender. The states of Alabama, Kentucky, New Jersey and Washington are also investigating Celsius after it stopped people from accessing their money.
All products recommended by Engadget are selected by our editorial team independently from our parent company. Some of our stories contain affiliate links. If you buy something through one of these links, we may receive an affiliate commission.
https://www.engadget.com/crypto-lending-giant-celsius-files-for-bankruptcy-065843977.html?src=rss Crypto lending giant Celsius files for bankruptcy