Celsius, a crypto lending firm that had more than $8 billion in loans to clients and about $12 billion in assets under management in May, has just filed for Chapter 11 proceedings in the state of New York. As of now, the company revealed it has around $167 million dollars in cash that is ready to be deployed for operations.
The company believes that this step is in the best interests of its clients. One of the most recent statements by the company on this matter also shows that the bankruptcy proceedings are viewed as an opportunity to stabilize the business, which should also allow for restructuring and the maximization of value for stakeholders.
Celsius made headlines last month because it froze customer accounts. Since then, more than 1.7 million customers are still unable to withdraw their funds from the platform. This is expected to continue under the bankruptcy proceedings.
The community appears split on the announcement of this news. Danny Talwar, head of tax at crypto accounting software firm Koinly stated that this can become a “Mt.Gox-like” event. This means that people would not see their funds being returned in the near future.
This could be Mt.Gox 2.0. Court proceedings may drag out the process of Celsius customers receiving any of their deposits back well into the future.
The same sentiment was also shared by Adam Levitin, Law professor at Georgetown and principal at Gordian Crypto Advisors. Levitin also suggested that this process may not only take years, but can also mean that the customers of Celsius will only see pennies on the dollar.
On the other hand, CEO of Celsius, Alex Mashinsky, believes that this was the right decision for the company and the community. Mashinsky also pointed out that Celsius has an experienced team that will help with the process and added:
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.
Many see filing Chapter 11 as an opportunity for the business to restructure its finances properly and be able to continue working to pay out its debts.
Companies such as Marvel, Hertz, and General Motors have undergone Chapter 11 to reorganize while staying in business. Since Celsius was able to repay all of its debt for decentralized finance applications like Aave, Maker, and Compound, restructuring might help with getting the platform back to normal operations. However, customers must still wait for the withdrawal feature to be relaunched.