Crypto Lender Celsius Networks Files for Chapter 11 Bankruptcy

Embattled cryptocurrency lender Celsius Networks joins the list of companies filing for bankruptcy during the crypto winter of 2022. On Wednesday, July 13, Celsius made the final decision to file for Chapter 11 bankruptcy in the United States Bankruptcy Court for the Southern District of New York.

The company initiated the bankruptcy proceedings in order to kickstart its business and restructure its operations to maximise the value for stakeholders. Under the Chapter 11 bankruptcy, the debtor i.e. Celsius Networks will negotiate with the creditor to alter the terms of loans. However, it won’t have to liquidate all its assets. 

Speaking of the development, Alex Mashinsky, Co-Founder & CEO, Celsius said: “This is the right decision for our community and company. We have a strong and experienced team in place to lead Celsius through this process. I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.”

Celsius said that it currently has $167 million in cash on hand. The company believes that this will provide sufficient liquidity to support certain operations during the restructuring process.

Last week, another crypto lender Voyager Digital filed for Chapter 11 bankruptcy. Amid the severe crash in the crypto space during the last quarter, crypto lenders had a tough time managing liquidity and withdrawals.

Celsius has a total of 100,000 creditors that include both customers and lending counterparties. Last month, Celsius stopped withdrawals for its customers. Since then, it has been working to repay its loan and secure its collateral assets.

Celsius Networks has reportedly repaid over $800 million worth of loans to decentralised finance (DeFi) apps such as Have, Compound, and Maker. Celsius Networks said that it is working actively to protect its customers.

However, there’s no guarantee that the customer sill get all their funds back. In its terms and conditions, Celsius Networks notes that the funds would not be recoverable in case the company goes entirely bankrupt, enters liquidation, or is unable to repay its obligations.

Celsius Networks notes: “In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, any Eligible Digital Assets used in the Earn Service or as collateral under the Borrow Service may not be recoverable.”