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Celsius Blockchain DeFi Lender Files for Bankruptcy
The hammer has struck: Celsius Network, a New Jersey-based crypto lending services provider, announced on Wednesday that it has filed for Chapter 11 bankruptcy. After a series of descending cryptocurrency price swings that saw the crypto market bleed around 60% of its valuation in six months - and a number of miscalculated risks - the provider says its bankruptcy filing aims to enable a "comprehensive restructuring plan" to the benefit of "all stakeholders". As is often the case, shark and whale lenders have started feeding on the bloodbath before other, less leveraged investors do.
When opening Celsius Network's website, viewers are greeted with a message pointing towards a blog post on the bankruptcy filing. (Image credit: Celsius Network)
According to the filing in the US Bankruptcy Court for the Southern District of New York, Celsius estimated its assets and liabilities to be in the range of $1 billion to $10 billion. The bankruptcy filing comes after the Decentralized Finance (DeFi) player froze all withdrawals, swaps, and transfers on its platform "to stabilize its business and protect its customers" on June 12. Interestingly, Celsius took much longer to freeze deposits, which led to some users' funds being pulled towards its financial black hole after the freeze took place.
Celsius Mining, the company's cryptocurrency mining unit that announced intentions of undergoing an Initial Public Offering (IPO) as early as March this year filed for bankruptcy as well.
Celsius Network's homepage pays homage to the 1.7 million customers who had their assets frozen and used to repay the services' debt. Notice the phone number and how it's presented. (Image credit: Celsius Network)
Laura Shin, a crypto journalist and podcaster who wrote The Cryptopians, a book analyzing the emergence days of crypto - and Ethereum in particular - told the Washington Post that Celsius "engaged in risky strategies for generating yield on their depositor's funds." Celsius' claim to fame rested on returns that could sometimes soar above 18% - just for users depositing (in crypto world, staking) their tokens with the service.
Celsius has separately issued motions with the New York court asking for it to be allowed to continue operating "in the normal course", in order to bring in the profits that would allow it to pay employees and continue benefits.
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Celsius represents a pervasive problem in the crypto industry, where financial services that claim to be decentralized (it's in the name) are actually centralized entities, with the power to control the flow of crypto assets.
