Cryptocurrency lender Celsius Networks has filed for Chapter 11 bankruptcy.
The company’s products allowed people to earn interest when depositing their cryptocurrencies with it. It also lent out cryptocurrencies.
However, it paused withdrawals and transfers between accounts last month, blaming ‘extreme market conditions’ triggered by the collapse of the Terra ecosystem.
Securities regulators in New Jersey, Texas and Washington were investigating the company, led by CEO Alex Mashinsky (pictured at Web Summit last year), over this decision.
“Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilise its business and protect its customers,” the company stated.
“Without a pause, the acceleration of withdrawals would have allowed certain customers – those who were first to act – to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they receive a recovery.”
Listing its estimated assets and liabilities at between $1 billion and $10bn, it said it had $167m cash to provide liquidity during the restructuring process.
However, it is not requesting authority to allow customer withdrawals.
Celsius raised $750 million in Series B funding last year from investors including WestCap and Caisse de dépôt et placement du Québec – Canada’s second-largest pension fund – valuing the company at several billion dollars.
It also raised $20m in crowdfunding in 2020.
Crypto exchange FTX, which is looking at bailing out several struggling crypto companies, reportedly passed on the opportunity to buy the struggling lender due to the state of its finances.