Celsius Network, a financing network based on blockchain technology, has gone bankrupt.
The crypto lending behemoth was not exempt from the financial crisis that has recently continued to dominate the space. After a month of suspending withdrawals, swaps, and transfers between accounts, the company’s native token, CEL, has lost half of its value and has now filed for bankruptcy protection.
Because of this, some people invested in Celsius have lost their life savings.
Indeed, it has affected millions of investors, who are presently on a sinking ship and unsure of when business as usual will continue. Moreover, despite Celsius’s assertion that withdrawals should be allowed, recent events have reduced investor hopes.
CEL’s native coin has experienced large capital outflows in light of the company’s problems. As a result, CEL’s market cap has drastically decreased by 85% since 2021, falling from $1.06 billion on January 1 to $0.15 billion on July 14.
Amidst the holders’ best efforts, the token has seen significant losses. They wanted the cryptocurrency to return to its highs to save the collapsing company. Alas, that did not seem to happen.
Why did the Network file for bankruptcy?
In a recent report, Celsius claims that it filed for voluntary bankruptcy to give the company the chance to stabilize its operations and complete a comprehensive restructuring transaction that optimizes value for all stakeholders. Celsius is struggling to survive since it doesn’t have enough money to pay its payments to creditors.
The firm has provided an update regarding customer withdrawals, but it’s not good.
Members of the Special Committee of the Board of Directors for Celsius stated in the release that the filing includes Celsius’s challenging but necessary choice last month to pause withdrawals to safeguard its clients. Without a break, the acceleration of withdrawals would have allowed some customers—those who moved first—to obtain full payment while leaving others behind to wait for Celsius to recoup value from less liquid or longer-term asset deployment activities.
Although user money was still locked, Finbold reported that on July 7, the business had fully repaid its Bitcoin mortgage- which revived investor optimism.
That’s not all; the company is also being sued by a former employee who alleges that the company operated a Ponzi scheme and lacked proper safeguards for client money.
Will They Now Permit Clients to Withdraw Their Money?
The company said it wouldn’t happen any time soon. Due to the bankruptcy filing, creditors will be waiting in line to collect the money they are owed, and Celsius’s customers will also need to wait in line.
Additionally, Celsius has very little authority to take action without the judge’s approval now that it has filed for bankruptcy.
Furthermore, Celsius has declared that it will not be asking for permission to permit customer withdrawals at the moment. Instead, the Chapter 11 proceedings will be used to address customer claims.