July 13 (Reuters) – U.S. crypto lender Celsius Network said on Wednesday it has filed for bankruptcy in New York, becoming the latest victim in the cryptocurrency sector of a dramatic drop in token prices.
New Jersey-based Celsius froze withdrawals last month, citing “extreme” market conditions, cutting off access to savings for individual investors and sending tremors through the crypto market.
In a lawsuit in the U.S. Bankruptcy Court for the Southern District of New York, Celsius estimated its assets and liabilities at between $1 billion and $10 billion with more than 100,000 creditors. The company has $167 million in cash.
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“This is the right decision for our community and company,” said Celsius co-founder and CEO Alex Mashinsky.
Crypto lenders like Celsius have thrived during the COVID-19 pandemic, attracting depositors with high interest rates and easy access to loans rarely offered by traditional banks. They borrowed tokens from mostly institutional investors, profiting from the difference.
But the lenders’ business model has come under scrutiny following a sharp sell-off in the crypto market triggered by the collapse of major tokens terraUSD and luna in May.
Another US crypto lender, Voyager Digital Ltd (VOYG.TO), filed for bankruptcy this month after suspending withdrawals and deposits. Singapore’s Vauld, a smaller lender, also froze withdrawals this month. Read more
Celsius said in a statement that it had not asked the authority to allow customer withdrawals, adding that it had asked the court to allow it to continue operations such as paying employees.
Celsius’ move in June to freeze withdrawals prompted state securities regulators in New Jersey, Texas and Washington to launch investigations into the firms. Read more
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Reporting by Maria Ponnezhat in Bengaluru; Editing by Sherry Jacob-Phillips and Edmund Blair
Our standards: The Thomson Reuters Trust Principles.
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