Over the past few months, the crypto market has witnessed a steady decline in value. Some of the world’s most popular digital coins traded globally have reportedly fallen as much as 70% in value in the last 7 months. Although a common nature known to this market is its incredible volatility, the dramatic plunge in prices on a daily basis is enough reason for many stakeholders to have tumultuous times. Unfortunately, Celsius Network is the latest corporate victim to file for Chapter 11 bankruptcy protection.
Over the past one month, the crypto lending company has paused withdrawals and transfers between accounts leaving its 1.7 million customers unable to redeem their assets. The company claimed extreme market conditions as a reason for such a decision.
While announcing the decision to file for Chapter 11 bankruptcy, the company said “Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilise its business and protect its customers. 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.”
According to Celsius Network’s filing, estimated assets and liabilities on a consolidated basis are in the range of $1 billion to $10 billion. The five largest claims range between $20 million and $80 million each. Last year, Fortune valued the company at about $3.25 billion and managed about $24 billion worth of assets right before this year’s sell-off. That had reportedly dipped to around $12 billion before it locked withdrawals, but the bankruptcy filing suggests it has less now.
Although, Celsius is not requesting authority to allow customer withdrawals yet. According to a press release, the company revealed it has filed a series of customary motions with the court. This series of customary motions are supposed to allow it to continue operations in the normal course. For now, the company hopes to continue operating with its remaining $167 million in cash it’s undergoing its restructuring process. For now, state securities regulators in New Jersey, Texas and Washington have stepped into action to investigate the crypto lender’s decision and restructure the company.
Celsius Network isn’t the first to file bankruptcy, earlier in June, a similar crypto lender Voyager Digital Ltd did file for bankruptcy. Voyager Digital also reportedly suspended withdrawals and deposits for customers. As a result of the crash in cryptocurrency prices, the year 2022 has been very tough on the crypto market unlike in the pandemic year. The year 2020 witnessed many crypto lending companies record a boom in business, but many of them have suddenly tumbled following the collapse of major token that has remained consistent.