Another crypto lending company falls victim to crypto crash.
A month after freezing customers' assets due to turbulence in the crypto market, Celsius Network, one of the world's largest cryptocurrency lenders, has filed for bankruptcy protection.
While the bankruptcy court restructure the company, the crypto lending company is hoping to continue its operation using the remaining $167 million in cash, according to The Verge.
As per TechCrunch, Celsius Network said that "the necessary decision to file for bankruptcy would provide the firm an opportunity to stabilize its business."
Celsius Network Locked Customer Withdrawals Last Month to Avoid Bank Run
The Celsius Network's filing stated that the company has between $1 billion and $10 billion in assets. However, it appears that the company owes a similar amount. Five of the largest claims are ranging between $20 million and $80 million each.
According to TechCrunch, Chapter 11 bankruptcy filing in federal court in New York shows that it has more than 100,000 creditors.
According to Fortune, last year, the company was valued at $3.25 billion. Before this year's sell off, Network Celsius managed as much as $24 billion worth of assets.
However, the $24 billion asset reportedly plunged to around $12 billion before it locked customers' assets. The company has less now as the bankruptcy filing suggests.
Celsius claimed that last month, it locked withdrawals to avoid a bank run.
According to the company's press release, without a pause, the acceleration of withdrawals would have allowed customers, who were first to act, to be paid in full.
On the other hand, before they receive a recovery, other customers will be left behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities.
Co-founder and Chief Executive of Celsius Believes the Company Would Get Through the Process
Alex Mashinsky, co-founder and chief executive of Celsius Network, claimed that the company has a strong and experienced team that would lead the company through this process.
Celsius Network's announcement that it filed for bankruptcy protection follows weeks of speculation about the financial strength of the company.
The crypto lending company established one of the largest crypto banks. They offer better returns to customers and promise that the investment was less risky.
In fact, the company let users deposit their Bitcoin, Ethereum and Tether and receive weekly interest payments. The platform offers as much as 18% interest a year, depending on the time horizon and the token.
According to TechCrunch, the company took great bets on untested ventures and thus, lent to large crypto companies. Celsius Network took even greater risks last year as the demand for new loans from institutional investors started to decelerate, according to TechCrunch.
Other digital lenders also suffered the same fate as Celsius Network. Just this month, Three Arrows Capital also filed for bankruptcy as well as Voyager Digital, a high-profile crypto broker.
In a press release, Celsius Network said that a series of customary motions have been filed with the court to allow the company to continue operating in the normal course.
However, the company is not requesting authority to allow customer withdrawal at present, as the claims of customers will be addressed through the Chapter 11 process.
Related Article: Crypto Lender Company Celsius Network Repays $120 Million Loan To Maker
