This cryptocurrency firm got into trouble when it lent out cryptocurrencies at too high percentages and then couldn’t handle the situation when the bear market came.
The company shared the announcement of its situation on its Twitter account:
— Celsius (@CelsiusNetwork) July 14, 2022
However, it is not the only company that has declared Chapter 11 bankruptcy, which allows a company to continue in business and restructure its liabilities under the supervision of the courts.
We recently informed you that Scandinavian airline SAS has decided to address its poor financial situation in the same way. In the past, well-known companies such as General Motors, Hertz, Delta Airlines and Marvel have been rescued in this way.
The situation may have its advantages
The situation where Celsius declares Chapter 11 bankruptcy may have its advantages. Danny Talwar, who is the head of the tax department at Koinly, said on the subject.
“Chapter 11 bankruptcy allows Celsius to restructure its debts and assets through the court system. Crypto-investors should not panic because filing for Chapter 11 bankruptcy provides some certainty to the market.”
Interestingly, before this move, Celsius had paid off its debts to DeFi platforms Compound, Aave, and Maker, and as recently as a month ago, it owed $820 million to these platforms.
However, he also added that this whole situation may take a long time to resolve, which would mean that Celsius’ aggrieved customers will take a long time to get their funds. He likened the situation to the Mt. Gox exchange case, where some sort of resolution is only beginning to take shape after about eight years.
“For context, Mt. Gox was the largest exchange for Bitcoin from 2010 until its collapse in 2014, losing over 850,000 BTC in deposits. Customers are still awaiting the release of funds from the exchange now (in 2022), with court proceedings in multiple jurisdictions globally and in Japan.”
Celsius plans to continue to operate
Celsius wants to continue to stay active and continue its business. According to its statement, it plans to use its available funds (approximately $167 million in cash) to fund the continuation of the restructuring process to resume activity on the platform and return value to customers.