The Celsius Network logo and cryptocurrency representation are seen in this illustration taken June 13, 2022. DADO RUVIC/Reuters
Celsius Network Ltd. has filed for bankruptcy protection, arguing that the restructuring will help the cryptocurrency lender stabilize and reorganize its business as tokens such as bitcoin fall to multi-year lows and investors scrutinize the complex web of ties between the troubled crypto companies.
Last month, Celsius abruptly halted all transactions and withdrawals among its nearly two million customers, citing “extreme market conditions.” The New Jersey-based company has long touted itself as “the world’s leading crypto earning and lending platform,” offering interest rates of up to 18 percent to depositors.
Because of its early success, Celsius attracted major global investors, including Canadian pension fund Caisse de dépôt et placement du Québec, which invested US$400 million as part of a funding round that valued Celsius at about US$3 billion late last year.
In February, Celsius hired former Royal Bank of Canada chief financial officer Rod Bolger as its own head of finance after he left the bank last year. “As a proven leader in the space with significant support, liquidity and an incredibly exciting growth trajectory, I knew Celsius was the right home for me,” Mr. Bolger said in a company blog post.
But late Wednesday, Celsius filed for bankruptcy protection in New York, saying it has $167 million in cash and values assets and liabilities between $1 billion and $10 billion.
The Caisse initially defended Celsius when the company suspended transactions on June 13. “Celsius takes proactive actions to meet its obligations to its customers and has met its obligations to its customers thus far,” said spokeswoman Kate Monfet.
In an interview on Thursday, Ms. Monfet declined to answer whether the Caisse’s capital investment would be wiped out by Celsius’ bankruptcy proposal. She also declined to say whether it would affect the Caisse’s future plans for cryptocurrency investments.
“We are following the matter closely and are reviewing the documents submitted by Celsius. We are unable to comment further at this time,” Ms Monfet told The Globe and Mail.
Securities regulators in Vermont, Kentucky, New Jersey, Texas, Alabama and Washington confirmed Thursday that they are actively investigating Celsius, adding that the company’s bankruptcy does not impede their probes. The US Securities and Exchange Commission declined to comment.
Celsius did not respond to repeated requests for comment, prompting speculation about what exactly prompted the company to freeze its customers’ accounts.
“This is the right decision for our community and company,” Alex Mashinsky, CEO of Celsius, said in Wednesday’s blog post. “I am confident that when we look back on Celsius’ history, we will see this as a defining moment where acting with determination and confidence served the community and strengthened the company’s future.”
Celsius added that his the available cash “will provide sufficient liquidity to support certain operations during the restructuring process.” The company said it expects the court to approve its requests to pay the employees and continue their benefits without interruption.
It remains unclear whether Celsius users will be able to withdraw some of their money from the platform. According to the company’s terms of service, Celsius states: “You expressly understand and acknowledge that the treatment of Digital Assets in the event of such bankruptcy proceeding is unsettled, not guaranteed, and may result in a number of outcomes that are impossible to reliably predict , including but not limited to being treated as an unsecured creditor and/or the total loss of any and all digital assets reflected in your Celsius account, including those in a custodial wallet.”
Celsius – which has more than 100,000 creditors – also states in its terms of service that if the company goes bankrupt, customers “may not have any legal remedies or rights in relation to Celsius’ obligations”.
Bitcoin has fallen more than 70 percent this year. It recently fell well below the psychologically important $20,000 level – around $19,700 on Thursday. This price level is of symbolic importance as it was roughly the peak of the 2017 cycle before bottoming out.
Meanwhile, Ether, the second most popular cryptocurrency, is also trading below its symbolically important $1,000 level in July. On Thursday, Ether rose to around $1,080.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox morning or evening. Sign up today.
Add Comment