Celsius Network, a U.S. Cryptocurrency lender, announced on Wednesday that it had filed for bankruptcy in New York, making it the latest victim of the sharp decline in token prices in the cryptocurrency market.
Last month, the New Jersey-based company Celsius halted withdrawals due to “extreme” market conditions, preventing individual investors from accessing their savings and shaking the cryptocurrency market.
Celsius estimated its assets and liabilities to be between $1 billion and $10 billion in a court filing at the U.S. Bankruptcy Court for the Southern District of New York, with more than 100,000 creditors. $167 million in cash is on hand at the business.
Alex Mashinsky, CEO of Celsius and a co-founder, said, “This is the right choice for our community and business.”
During the COVID-19 pandemic, cryptocurrency lenders like Celsius saw a surge in business, luring depositors with high-interest rates and convenient access to loans that conventional banks hardly ever offered. They profited from the difference by lending tokens to mainly institutional investors.
But after a significant sell-off in the cryptocurrency market caused by the failure of the important tokens terraced and luna in May, the lenders’ business model came under fire.
This month, Voyager Digital Ltd (VOYG.TO), a different American cryptocurrency lender, filed for bankruptcy after halting deposits and withdrawals. This month, Vauld, a smaller lender in Singapore, also stopped accepting withdrawals.
In a statement, Celsius insisted that it was not requesting permission to permit customer withdrawals, but rather that it had asked the court for permission to carry on with operations like paying employees.
State securities regulators in New Jersey, Texas, and Washington launched investigations into the firms in response to Celsius’s decision to freeze withdrawals in June.