According to The Wall Street Journal, the troubled Celsius is preparing for bankruptcy. Celsius Network LLC has hired advisers specialised in restructuring companies. These advisors come from the consulting firm Alvarez and Marsal and could help with a possible bankruptcy filing.
The Wall Street Journal relies on anonymous sources and has unfortunately not been able to obtain confirmation or denial from representatives of Celsius, nor Alvarez, and Marsal.
Why is Celsius in trouble?
Celsius is a crypto platform on which users can receive interest on their crypto assets but can also take out loans in crypto. Passive income on your crypto sounds good, but you are exposing your crypto to the risks of a third party. And that third party is in trouble.
The problems started after Celsius made a large investment in a strikebreaker called stETH. StETH lets people and companies like Celsius stake (lock up) coins on the Ethereum blockchain to earn additional returns through DeFi. When the crypto market started to collapse in May, the value of sETH trading also collapsed, and it became increasingly difficult to sell this coin.
Blocking withdrawals to stop bleeding
This made it harder for Celsius to raise funds when users of their platform wanted to withdraw their money. On 12 June, Celsius announced that it was stopping withdrawals due to “extreme market conditions,” an apparent attempt to fend off the digital equivalent of a bank run. Celsius wrote:
“Acting in the best interests of our community is our top priority. In service of that commitment and to adhere to our risk management framework, we have activated a clause in our terms of use that enables this process. Celsius has valuable assets, and we are working hard to meet our obligations.”
Impact on the crypto market
The company’s decision to pause withdrawals has also led to service freezes at other companies. The crypto lending service Babel Finance and the crypto exchange CoinFLEX have both suspended withdrawals in the days since Celsius’ decision.
Stabilising money flows
It was announced last week that Celsius has hired the law firm of Akin Gump Strauss Hauer & Feld LLP to advise on possible solutions to its ongoing financial problems.
In a blog post dated 20 June, the Celsius team told the crypto community about a recovery plan and the status of the company. The main goal was to stabilise the liquidity and operations of the platform.
The Celsius team also informed the crypto community that stabilising the platform would take time. Unfortunately, they then behaved like someone who completely ghosts the other after one Tinder date. They paused all social media interaction (especially Twitter), and the AMAs (ask-me-anything) sessions were cancelled. This is “to focus on navigating these unprecedented challenges and fulfilling our responsibilities to our community.”
Deprivation makes one appreciate
Suppose Celsius files for bankruptcy, and they are able to restart the company through a proper restructuring, then it is hoped that this suffering was not in vain, and they have learned to be humble.
