Celsius bankruptcy: What’s happening with withdrawals as crypto lender seeks protection?

On June 12, crypto lending platform Celsius announced it was pausing the ability of customers to withdraw their funds due to “extreme market conditions.” Those market conditions, presumably, were the death spiral that cryptocurrencies have been experiencing for much of 2022.

The news sent a shockwave through crypto investors—particularly those who had their currencies locked up in the Celsius platform. That platform worked by allowing customers to park their crypto assets with Celsius, who would then in turn lend their customer’s coins out in return for a high-interest rate, which Celsius would share a portion of with the customer.

But things have gone from bad to worse in the past day for Celsius customers who are desperately wishing to get their assets back. Yesterday, Celsius filed for Chapter 11 bankruptcy. Here’s what that likely means for Celsius’s customers:

• Why did Celsius file for bankruptcy? In a press release, Celsius says it filed for the voluntary bankruptcy “to provide the Company with the opportunity to stabilize its business and consummate a comprehensive restructuring transaction that maximizes value for all stakeholders.”
• What does this mean? Essentially, Celsius doesn’t have enough money to cover its debts to creditors and is trying to find a way forward so it can survive.
• Has the company said anything new about the pause on customer withdrawals? Yes, but the news isn’t great. In the release, Celsius’s members of the Special Committee of the Board of Directors said, “Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilize its business and protect its customers. 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.”
• So, are they going to let customers withdraw their money now? Not any time soon. The bankruptcy filing means creditors will be lining up to get the monies owed to them—and Celsius’s customers will need to get in that line, too. And now that Celsius has filed for bankruptcy, it has very little power to do anything without the judge’s permission. And Celsius has stated it “is not requesting authority to allow customer withdrawals at this time. Customer claims will be addressed through the Chapter 11 process.”
• So are Celsius customers screwed? Things don’t look great, at least in the short to medium term. Georgetown law professor Adam Levitin told CNBC that Celsius customers might have to wait years to get their money back—but even then they may just get pennies on the dollar.
• What can Celsius customers do? Right now, not much. The bankruptcy proceedings will need to play out. In the meantime, customers can contact the company’s claims agent at 1-855-423-1530 or email celsiusinquiries@stretto.com.

https://www.fastcompany.com/90769390/celsius-bankruptcy-whats-happening-with-withdrawals-as-crypto-lender-seeks-protection?partner=rss&utm_source=rss&utm_medium=feed&utm_campaign=rss+fastcompany&utm_content=rss