In its statement, Celsius, which suspended withdrawals in mid-June, said it was seeking to restructure in a way that would maximize value for all stakeholders, and said it had $167 million of cash available to meet urgent needs in the meantime.
In the United States, Chapter 11 allows a company that is unable to pay its debts to restructure away from its creditors, while continuing its current operations.
The company, which had amassed more than $20 billion in assets by offering interest rates as high as 18% to customers who deposited their cryptocurrencies, had paused all withdrawals as well as some other functions in mid-June, citing “extreme market conditions."
Cryptocurrency platforms have come under increasing pressure as the Federal Reserve aggressively raises interest rates, hurting risk sentiment and squeezing funding costs. Crypto broker Voyager Digital Ltd. filed for Chapter 11 bankruptcy protection earlier this month, while liquidators have been called in for bankrupt crypto hedge fund Three Arrows Capital. Other companies have suspended withdrawals, such as CoinFlex and Babel Finance, due to a lack of cash.
In its statement Wednesday, Celsius called that pause a “difficult but necessary decision." Without the halt, it said, “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."
"This is the right decision for our community and company," said Alex Mashinsky, co-founder and CEO of Celsius. "I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company."
Celsius promised yields of more than 18% to customers willing to lend out their crypto. In turn, it lent those coins to institutional investors, but also was a participant in a slew of decentralized-finance applications.
The lender is just one of many crypto companies suffering as risky bets turned against them in the current bear market. Another centralized lender, Babel, halted withdrawals, too. Exchange Voyager Digital filed for bankruptcy, while crypto hedge fund Three Arrows Capital was put into insolvency proceedings in the British Virgin Islands and later filed for Chapter 15 bankruptcy.
