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Crypto lender Celsius files for bankruptcy after crypto crash

Kitco News

(Kitco News) The latest casualty of the massive crypto crash that saw $2 trillion wiped off the overall market cap since last year's all-time highs is Celsius, one of the largest crypto lenders, which filed for Chapter 11 bankruptcy.

Celsius initiated voluntary Chapter 11 proceedings Wednesday, listing between $1 billion and $10 billion in assets and more than 100,000 creditors.

The goal is "to provide the Company with the opportunity to stabilize its business and consummate a comprehensive restructuring transaction that maximizes value for all stakeholders," the company said.

Celsius has been in the middle of the storm after pausing all withdrawals from the network and essentially freezing its customers' assets. The company is known for providing high yield to customers who deposit their cryptocurrency. As of June, the company was able to amass more than $20 billion in assets by offering an 18% yield to depositors. Celsius also provided loans and promised small risks with outsized returns.

"This is the right decision for our community and company," said Alex Mashinsky, co-founder and CEO of Celsius. "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."

The firm is looking to continue to operate. "Celsius has $167 million in cash on hand, which will provide ample liquidity to support certain operations during the restructuring process," the statement said.

Celsius did not respond to a request for comment.

The company was part of the collateral damage as crypto markets began significantly selling off in the second quarter.

When pausing withdrawals in June, Celsius cited "extreme market conditions."

Contagion risks have rapidly spread across the crypto space as decentralized lending has heightened debt risk and prices tumbled. Bitcoin is trading 70% off its November record high of $69,000. Ethereum, the world's second-largest cryptocurrency, is down 77% from its November all-time highs.

These risks also led to the collapse of well-known lending platforms such as Three Arrows Capital and Voyager Digital.

Celsius bankruptcy filing comes a day after Vermont's Department of Financial Regulation (DFR) said the troubled crypto lender "is deeply insolvent."

According to the statement released Tuesday: "Celsius deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities," the DFR said. "Celsius compounded these risks by using customer assets as collateral for additional borrowing to pursue leveraged investment strategies … The Department has joined a multistate investigation of Celsius."

In the meantime, Celsius paid back its last significant outstanding debt this week, according to Etherscan data. It was $50 million worth of DAI — MakerDAO's dollar-pegged stablecoin — to DeFi lending protocol Compound.

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