Documents filed as part of Celsius Network’s Chapter 11 application reveal that the crypto lender’s decision to halt withdrawals in June was largely brought about by the decision to not provide Tether additional collateral and instead agree to have the loan liquidated.
According to the document, Celsius lost close to US$100 million in May and June 2022 after Tether liquidated a loan worth US$841 million. And by the middle of June, the dollar value of the crypto lender’s remaining assets had decreased so dramatically that it became unable to borrow more stablecoins, and as a result failed to maintain the crypto assets necessary to cover their crypto liabilities.
The crypto lender also noted that its ability to recover was hindered by the fact that it made its earnings in digital assets that were swiftly decreasing in value, while its expenses remained mostly in fiat currencies.
In their first appearance in bankruptcy court on Monday, Celsius defended the decision to put a pause on customer withdrawals, saying it was done to protect their customers, and prevent a “run on the bank” situation where customers who still had funds on the platform would be left holding the bag by customers selling off.
“The reality is the pause was necessary in order to preserve the assets that the company has so they can be…equitably distributed to all of the platform’s customers,” according to Celsius lawyer Patrick Nash Jr.
The plan, added Nash, is that Celsius will use chapter 11 to survive the crypto downturn as it comes up with an equitable repayment plan for the platform’s users.
According to an official from the bankruptcy division of the Justice Department in a report by The Wall Street Journal, an official committee, which will be paid for by Celsius, will be formed to represent the platform’s customers at the bankruptcy court.
Court documents submitted last week showed that the crypto lender has remaining assets totaling US$4.3 billion versus liabilities amounting to US$5.5 billion, thus a vast deficit of US$1.2 billion. But analysts are saying that it’s possible that Celsius is overvaluing its assets and the hole that they’re in could actually be deeper than US$1.2 billion.
Information for this briefing was found via Twitter, The Wall Street Journal, and the sources mentioned. The author has no securities or affiliations related to this organization. Not a recommendation to buy or sell. Always do additional research and consult a professional before purchasing a security. The author holds no licenses.
