Crypto lender Celsius files for Chapter 11 bankruptcy protection

A Month after freezing customer withdrawals, Celsius has officially announced that the firm is filing Voluntary Petitions for Chapter 11 bankruptcy protection “to provide the Company with the opportunity to stabilize its business and consummate a comprehensive restructuring transaction that maximizes value for all stakeholders”, according to a press release published yesterday.

According to the court filing in a US Bankruptcy Court, the company estimates its assets in the range of $1 billion to $10 billion, with an approximately equal amount in liabilities. Under Chapter 11, damaged companies are allowed to continue operations during the reorganization process while repaying their outstanding debts to customers.

Celsius' troubles began after it halted all operations in June due to a liquidity crisis. Since then, the crypto lender has been actively paying back its outstanding debts to MakerDAO, Compound, and Aave to avoid liquidation of its loan positions.

Celsius specified in the press release that currently it is not requesting from the authority to allow customer withdrawals. Customer claims are to be handled through the Chapter 11 process. Celsius claims it has enough cash on hand ($167 million) to support certain operations during the restructuring process.

Yesterday, Vermont’s Department of Financial Regulation issued a press release with a warning to Celsius investors, encouraging them to “proceed with caution”, as the Department believes that the company is “deeply insolvent” and doesn’t have enough liquidity to meet its obligations. The watchdog has also accused Alex Mashinsky, the CEO and Co-founder of Celsius, along with other company officials of making false statements “about the safety of customer funds and the company’s ability to meet withdrawal obligation”.