Crypto lending company Celsius confirmed that it has filed for Chapter 11 bankruptcy in the Southern District Court of New York City on Wednesday, July 13 2022.
A Chapter 11 bankruptcy permits a company to stay in business, giving it time for restructuring its obligations.
Throughout the restructuring process, Celsius plans to continue to operate the crypto lending platform. However, withdrawals will be on hold for the time being.
Moments ago, @CelsiusNetwork filed voluntary petitions for Chapter 11 protection and announced that the company initiated a financial restructuring. https://t.co/vf5wsT6TMp
— Celsius (@CelsiusNetwork) July 14, 2022
There are currently six states in America that have opened investigations into the New Jersey-based company: Alabama, Kentucky, New Jersey, Texas, Washington, and Vermont.
On Tuesday, Vermont’s Department of Financial Regulation (DFR) issued a warning against Celsius, citing that the company was “deeply insolvent” without enough “assets and liquidity” in providing business continuity. The DFR has also accused Celsius of allocating customer funds towards risky investments.
Earlier on Wednesday, Celsius had closed off the last of its outstanding debt to Aave, Compound, and Maker. Over this past month, Celcius had reduced its initial debt from $820 million to $0.013 million.
In a company statement, Celsius states that it aims to use “ample liquidity” of $167 million in cash to support “certain operations” with a goal to “restore activity across the platform”. Celsius also intends to “return value to customers” during this restructuring period.
There have been reports that Celcius has replaced its law firm from Akin Gump Strauss Hauer & Feld LLP with Kirkland & Ellis LLP. Kirkland & Ellis LLP is the same firm that has assisted Voyager, another crypto loan company facing insolvency, with its bankruptcy filing last week. Centerview Partners is acting as financial advisor, and Alvarez & Marsal is serving as restructuring advisor to Celsius.
In addition to these changes in management, new directors have been appointed to provide additional leadership and expertise, including the Founder and CEO of XOUT Capital David Barse, a “pioneer in distressed investing”, and a Founder and Managing Member of Drivetrain LLC, a professional fiduciary services firm.
It is unclear whether depositors and users of the lending platform will get their assets back. No formal or public statements have yet been made by CEO Alex Mashinsky regarding the return of funds.
However, Celsius says it intends to continue pay and provide benefits for its employees. In addition, Celsius confirmed that it will continue to service existing loans with maturity dates, margin calls, and interest payments.
