After weeks of difficulties and rumors, it is now done: the company Celsius declares bankruptcy. And this, even if it had managed to settle its debts in stablecoins. Here is an update on what this means for the company and its customers.
Celsius’ difficulties end in bankruptcy
Celsius’ problems had started in mid-June: the platform had announced to suspend withdrawals and transfers of cryptocurrencies, creating a shockwave in the ecosystem. Rumors of default had already spread since the beginning of the month, and several people had pointed to mismanagement of funds.
Celsius played with fire by offering its users very high returns: to honor them, it used their funds on autonomous market makers. In addition, Celsius’ exposure to the stEH token, which has fallen from its value of 1 ETH, has added fuel to the fire.
In recent weeks, however, Celsius had begun to pay off its creditors. Earlier this week, for example, the platform paid $20 million in USDC to Aave. Earlier in the month, Maker received $41 million in IAD. On Wednesday, we learned that the platform had managed to pay off all its debts in stablecoin.
But what about the users? They were concerned that their funds were used to bail out Celsius, not to compensate them. Withdrawals are still currently blocked. Hence the backlash when Celsius announced last night that it was declaring bankruptcy.
Celsius’ future in question
So just like Voyager Digital last week, Celsius is undergoing a voluntary “financial reorganization”. In practical terms, this means that the company is filing for bankruptcy in a court of competent jurisdiction, in order to maximize the recovery of funds.
In its press release, Celsius refers to a “difficult but necessary” decision, and goes back to the suspension of withdrawals. The priority, it said, would have been to treat its customers equally:
“Accelerating withdrawals would have allowed some customers – the early arrivals – to be paid in full while leaving others waiting.”
Celsius notes that it has $167 million in liquidity, which will allow it to continue to support operations during this bankruptcy process. Employees will continue to be paid. For his part, Alex Mashinsky, Celsius’ co-founder and CEO, was reassuring:
“This is the right decision for our community and our company. We have a strong and experienced team that will guide Celsius through this process. I am confident that when we look back […] we will look back on this as a defining moment, one where we acted with resolve and confidence to serve the community and strengthen the future of the company.”
Optimistic words, but probably not enough to appease Celsius users, whose funds have now been frozen for weeks. This fall of a lending giant shows in any case the extent of the crisis that the ecosystem is experiencing at the moment.
