Celsius Network announced today that it initiated a voluntary Chapter 11 bankruptcy protection with the Southern District of New York. Consequently, Celsius’ native token recorded a dip of over 50% at one point and dumped to a monthly low before recovering some ground.
According to Celsius, the need for bankruptcy protection will help it in the restructuring process.
“This is the right decision for our community and company,” said Alex Mashinsky, Co-Founder & 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.”
Celsius Network Not Out of the Woods Yet
The Celsius Network has been battling the liquidity crisis since June 13, 2022, when the company paused all withdrawals, swaps, and transfers between accounts. In the past few weeks, the company has paid off some debts to unlock users’ funds in different lending protocols, including AAVE and Compound.
For instance, a blockchain transaction associated with Celsius sent $81.5 million worth of USDC to the Aave protocol on Tuesday. As a result, the company was able to access $410 million worth of stETH.
While the crypto lender continues its restructuring process, various global jurisdictions led by several states in the US are investigating it.
“Unfortunately, this was expected. It was anticipated. It does not, however, stop our investigations. We will continue investigating the company and working to protect its clients, even through its insolvency,” Joseph Rotunda, director of enforcement at the Texas State Securities Board, said of the Celsius bankruptcy filing.
Customers Could Wait Years
Speaking to CNBC, Adam Levitin, Georgetown law professor and principal at Gordian Crypto Advisors, said Celsius customers may have to wait for years before accessing their cash.
He added that more crypto-related companies are likely to follow the same path as Celsius in the near future. “The tide is still going out, we’re just waiting to see how far it goes,” Levitin concluded.
Reportedly, the company has $167 million in cash at hand to help in its restructuring process. Worth noting that Kirkland & Ellis LLP is serving as legal counsel. Additionally, Centerview Partners is serving as a financial adviser, whilst Alvarez & Marsal is serving as a restructuring adviser to the lending company.