The cryptocurrency lending marketplace Celsius, which has its headquarters in the US, announced on Wednesday that it has filed for bankruptcy in order to “provide the company the best opportunity to stabilize business.” Celsius stopped all cryptocurrency withdrawals in June, citing “extreme market conditions.” The breakdown of the LUNA token in May marked the beginning of the unprecedented decline that is presently affecting the whole cryptocurrency market. The prices of the majority of crypto currencies, including Bitcoin (BTC), Ethereum (ETH), and Dogecoin (DOGE), fell as a result of these and other macroeconomic factors. Numerous crypto exchanges worldwide have suffered as a result of the global recession. Even Celsius laid off 150 staff earlier this month, or a quarter of its workforce.
Celsius stated in an updated FAQ that it has started a “restructuring process” to stabilize its business and “executed a comprehensive restructuring transaction that maximizes value for all stakeholders.” Celsius made this announcement on July 14.
In accordance with Chapter 11 of the US Bankruptcy Code, it has voluntarily filed petitions for reorganization. A Reuters story stated that Celsius listed its projected assets and liabilities on a consolidated basis in the $1 billion to $10 billion range.
What does Chapter 11 mean?
In the US, businesses can restructure their debts while carrying on with operations via the Chapter 11 process. The corporations American Airlines, Delta, General Motors, Hertz, and Marvel, to mention a few, have all successfully reformed under Chapter 11 and grown stronger, according to Celsius’ FAQ.
According to Celsius, it wants to enhance value for all parties involved. The corporation stated that acting in the best interests of all of its stakeholders, including our whole customer community, was a primary priority. The FAQ states that it aims to “emerge as a strong firm.”
Will Celsius resume crypto withdrawals on its platform?
No, according to the business, “most account activity will be suspended until further notice.” It stated that transfers between accounts, swaps, and withdrawals “would be halted.”
What does this entail for consumer borrowing, then?
Existing loans “produced by Celsius affiliates” will still be serviced, according to Celsius. This affirms that the interest payments, maturity dates, and margin calls will all proceed “just as before.”
Celsius made it clear that, for the time being, no further loans will be made. Customers were urged to keep their accounts and apps up to date for this time.
What does this mean for sellers?
The timing of seller payment, according to Celsius, would depend on “when the goods or services were given” to the business.
“Goods or services provided from July 13 onwards are considered ‘post-petition’ and will be paid in the normal manner. In fact, the court has ordered us to pay all post-petition debts when they become due, according to the business.
In contrast, Celsius noted that items or services delivered prior to July 13 are regarded as “pre-pleading” and “cannot be paid for without the authorization of the Court.” “At the conclusion of a Chapter 11 case, remedy of earlier petition duties is typically determined.”