Published , by Sam Chandler
Published , by Sam Chandler
The cryptocurrency house of cards has seen another player begin to tumble. Celsius is the latest crypto lender that is in the process of filing for bankruptcy, according to sources close to the matter. The company had billions worth of loans and was also recently sued by a former investment manager.
Reported on by Kate Rooney of CNBC on July 13, 2022, sources close to Celsius have stated that the company has begun informing state regulators that it plans to file for Chapter 11 bankruptcy “imminently”.
Celsius has been responsible for $8 billion in loans with $12 billion in assets. The knock-on effect this will have in the cryptocurrency space will no doubt be noticeable. To make matters worse for Celsius, it was recently sued by a former investment manager who alleges that the company failed to hedge risk and inflated its own digital asset. Vermont’s Department of Financial Regulation echoes this sentiment and adds that the company failed to disclose to its customers information about its financial condition and lending activities.
Kadhim Shubber and Joshua Oliver of Financial Times note that Celsius “relied on a stream of deposits from retail investors that it lent to large crypto companies” and that these were used on high risk ventures. The company promised high interest rates (accounts with a 17% yield according to CNBC) and low risk.
The company was allegedly not in a position to survive a turbulent market, according to former employees. Celius even went so far as to tell customers to “hodl” their stock in CEL despite founder Daniel Leon and other colleagues already selling the company’s digital coin CEL back to Celsius.
The folding of Celsius marks another major player in the cryptocurrency scene succumbing to the turn in the market. Just last week, Voyager crypto platform suspended trading and then filed for bankruptcy. This was following 3AC defaulting hundreds of millions of dollars’ worth of loans and then the co-founders going missing.
It’s a tumultuous time to be a cryptocurrency investor let alone a crypto platform owner. Is this just a small blip in a larger movement or is the industry facing its own tech bubble burst? Let us know your thoughts in the comments.