Crypto Lender Celsius Files for Bankruptcy After Major Cash Crunch

Crypto Lender Celsius Files for Bankruptcy After Major Cash Crunch

A major crypto company just declared bankruptcy, AGAIN. You may have seen my post about Voyager’s bankruptcy filing, and unfortunately, this situation is eerily similar. Celsius recently filed for a Chapter 11 bankruptcy, following in the footsteps of Voyager.

This filing comes after a month of freezing the accounts of over 1.7M customers due to what they call “extreme market conditions,” which basically rendered all of their customers helpless as they watched their crypto crash and burn.

Customers were given absolutely no information about if or when they would be able to withdraw their money, and it’s seriously affected a lot of people who have put considerable amounts of money into Celsius, with some people even claiming to have deposited their entire life savings.

You may be wondering why people would put so much money into this company, and it’s because it had an extremely promising business plan and future in mind. People who held their assets in Celsius would receive extremely high yields around 10% for stablecoins, which is higher than the average return of many traditional investments. So in an extremely volatile crypto market, they provided some stability to their customers who began to have extreme faith in where their money was being held. However, with the unforeseen decline in the crypto market, Celsius suffered from a similar issue as Voyager, in which they ran out of funds as their main cryptocurrencies drastically dropped in value. 

Customers are now unfortunately getting the short end of the stick as they do not have the option to withdraw their hard-earned investment money after this crash. According to Celsius and its legal team, they claim that users gave up their legal rights to their crypto when they deposited their holdings into Celsius, essentially meaning that they don’t have many rights when it comes to getting their money back.

Even if they did have the rights to their holdings, celsius currently does not have the assets needed to pay off all of their liabilities. The Celsius bankruptcy filing has revealed that Celsius holds $4.3B of assets and $5.5B of liabilities, meaning that they have a $1.2B hole in their current balance sheet. This discrepancy between assets and liabilities is really telling as to how unstable of a foundation Celsius was operating on.

In a court case hearing on July 18th, 2022, Celsius shared a PowerPoint presentation revealing their next steps for getting customers their money. Currently, the options are to withdraw their cash at a discount or continue to keep their crypto holdings in Celsius. Obviously, Celsius would prefer the latter, as they hope to be able to repay all of their debts in crypto after the major tokens have appreciated once the crypto winter comes to an end.

Now, these options are better than nothing for customers holding their assets in Celsius, but many people are still rightfully upset about the deceitful operations within the company that led them to such a massive discrepancy in their balance sheet. More information regarding customers' options will be released as this bankruptcy filing unfolds.