Crypto Banker Celsius Files for Bankruptcy, Its CEL Token Crashes 55% in 24 hours
- Managers of centralized cryptocurrency banking company Celsius (CEL) announced plans to seek Chapter 11 bankruptcy protection to restructure its debt and organization.
- Celsius also stated that it is requesting authority from the bankruptcy courts to allow it to continue operations as normal. However, Celsius has not asked the courts to allow customer withdrawals at this time.
- At press time, the Celsius token -- CEL -- had crashed more than 55%, swinging from a high of $0.9549 to as low as $0.4239 per token before rebounding to $0.6468 according to CoinMarketCap.
Celsius has not asked the bankruptcy courts to grant customers access to their frozen accounts, stating that customers' claims will be addressed through the Chapter 11 process.
Late Wednesday night, the leadership of centralized cryptocurrency banking firm Celsius announced that it had filed for Chapter 11 bankruptcy to protect it from debtors and claims while it restructures its organization and outstanding liabilities.
"This is the right decision for our community and company," said Alex Mashinsky, Cofounder and CEO of Celsius, in the official company statement. "We have a strong and experienced team in place to lead Celsius through this process. 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."
The announcement also stated Celsius currently has $167 million in cash on hand, which will provide some level of liquidity as it seeks to continue operating during the restructuring period.
Celsius customers left in the cold for now
The Celsius announcement further stated that the company is requesting authority from the bankruptcy courts to allow it to continue to pay employees and operate as "normal" during the process to reconfigure itself. However, Celsius noted that it has not asked the courts to allow customer withdrawals at this time. The statement notes that, "customer claims will be addressed through the Chapter 11 process."
Last month, Celsius froze the hundreds of millions worth of digital assets it holds on deposit to prevent its complete slide into insolvency. That decision blocked 1.7 million users from transferring or withdrawing their funds from their respective accounts, resulting in widespread outrage from those customers and triggering regulatory investigations from state agencies in Vermont, Washington, Texas, and New Jersey.
Recently, Celsius paid off hundreds of millions in debt and converted some of its liquid assets to wrapped Bitcoin, which would make those funds usable on the Ethereum blockchain, but its actions proved too little, too late to stop the bankruptcy filings.
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At the time of writing the Celsius token -- CEL -- had crashed more than 55% from a peak of $0.9549 to a low of $0.4239 per token before rebounding to $0.6468 across cryptocurrency exchanges. Bankruptcy protection does not typically bode well for customers and smaller retail investors who are usually at the end of the line in the restitution ranking. Most individual investors end up with pennies on the dollar for their respective holdings. Only time will tell what the fate of Celsius customers holds.
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