Celsius, the US-headquartered cryptocurrency lending platform, on Wednesday said it has filed for bankruptcy, in order to “provide the company with the best opportunity to stabilise the business.” In June, Celsius paused all crypto withdrawals citing “extreme market conditions.” The overall crypto market is currently facing an unprecedented meltdown, which started with the crash of the LUNA token back in May. This, along with other macroeconomic factors, led to a plunge in prices for most crypto coins, including the likes of Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE). The overall slump has had an adverse effect on several crypto exchanges around the world. Even Celsius laid off 150 employees — a quarter of its workforce — earlier this month.
In an updated FAQ, Celsius announced on July 14 that the company has initiated a “restructuring process” to stabilise its business and “consummate a comprehensive restructuring transaction that maximises value for all stakeholders.”
It has filed for voluntary petitions for reorganisation under Chapter 11 of the US Bankruptcy Code. As per a report by Reuters, Celsius listed estimated assets and liabilities on a consolidated basis in the range of $1 billion to $10 billion.
What does Chapter 11 mean?
In the US, Chapter 11 is a process through which companies can restructure their financial obligations while continuing their operations. Celsius said in its FAQ, “Many well-known companies have successfully reorganized under Chapter 11 and emerged stronger, including American Airlines, Delta, General Motors, Hertz, and Marvel, to name a few.”
Celsius added that it plans to maximise value for all stakeholders. “Acting in the best interest of our stakeholders, including our entire customer community, is our top priority,” the company said. It wishes to “emerge as a stronger company,” as per the FAQ.
Will Celsius resume crypto withdrawals on its platform?
No. The company said that “most account activity will be paused until further notice.” It said that withdrawals, swap, and transfers between accounts will “remain paused.”
So, what does this mean for customer loans?
Celsius said that existing loans “originated by Celsius affiliates will continue to be serviced.” It confirmed that maturity dates, margin calls, and interest payments will continue “as they have in the past.”
However, Celsius did clarify that it won’t be issuing new loans as of now. It asked customers to maintain their accounts and apps at this time.
What does this mean for vendors?
Celsius assured that vendor payments will “depend on when goods or services were provided” to the company.
“Goods or services provided from July 13 on are considered ‘post-petition’ and will be paid in the normal course. In fact, we are required by the Court to pay all of our post-petition obligations as they come due,” the company said.
However, in the case of goods or services provided before July 13, these are considered “pre-petition” and “cannot be paid without the Court’s permission,” Celsius said. “Treatment of pre-petition obligations are generally determined at the end of the Chapter 11 case.”
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