Lending protocol, Celsius, has been leading headlines all around the crypto space recently for its liquidity crisis and for leaving users without access to their funds. In the midst of a bear market, the network’s downfall exacerbated the market crisis. The failure has been a contributing factor to the negative momentum and sentiment seen in the market.
On June 28th, despite legal advice from partners and advisers to file for bankruptcy, the Celsius team looked set to avoid it and take another path to save their company. However, in a turn of events, Celsius filed for Chapter 11 Bankruptcy on Wednesday, July 13th.
According to a new court filing submitted after declaring for bankruptcy, there was a $1.2 billion hole in their balance sheets. This is why people suspect cryptocurrency exchange giant FTX walked away from a deal to acquire Celsius.
The document also showed the firm had $4.3 billion in assets and $5.5 billion in liabilities (of which $4.7 billion is owed to users). Included in their list of assets, Celsius claimed it had about $600 million in its native token, CEL, but as of July 12, the entire market cap for CEL was only around $170.3 million.
CEO Alex Mashinsky has blamed “poor” investment decisions along with mismanagement of rapid growth and bad market conditions as the reasons for the firm’s problems. Now users may suffer significant losses as a result.
Questions of financial reliability have rippled through the community after the collapse of other crypto companies, Voyager Digital and Three Arrows Capital, which have also filed for bankruptcy due to the collapse in crypto prices.