Celsius Network, the New Jersey-based crypto loan company, has filed for bankruptcy in New York to stabilize and restructure less than a month after suspending withdrawals, a press release on July 13 indicates.
Celsius Network Files for Bankruptcy
Celsius said the voluntary petition filed under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York would protect them as they restructure with the eventual intention of offering their stakeholders maximum value.
Subsequently, to guide the process, they have onboarded Kirkland & Ellis LLP as their legal counsel, Centerview Partners as the financial advisor, and Alvarez & Marsal as the restructuring advisor.
The crypto loan firm’s Members of the Special Committee of the Board of Directors acknowledged that the decision was difficult but necessary so that no customer is left behind. It also comes less than four weeks after they suspended withdrawals swaps and other operations, a decision they said was to protect their clients.
Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilize its business and protect its customers. Without a pause, the acceleration of withdrawals would have allowed certain customers—those who were first to act—to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they receive a recovery.
Alex Mashinsky, the CEO of Celsius, said their decision to file for bankruptcy protection is a defining moment. With the Celsius Network bankrupt, the CEO said they are working with resolve to turn around the company’s fortunes.
As of July 13, the Celsius Network had $167 million in cash, funds that will provide liquidity as they restructure. Meanwhile, they have added David Barse, the CEO of XOUT Capital, and Alan Carr, an investment specialist, to provide additional expertise.
The Fintech firm known for offering interesting bearing saving accounts, borrowing, and lending for various digital assets, including Bitcoin and Ethereum, has been under duress. Their liquidity pressure stems from, partly falling cryptocurrency prices and their exposure to Three Arrow Capital (3AC) loans which the hedge fund failed to pay. 3AC has since filed for bankruptcy.
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