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After weeks of speculation and rumors, lawyers representing crypto lending platform Celsius have officially notified regulators the company is filing for Chapter 11 bankruptcy protection.
"This is the right decision for our community and company," Celsius Co-Founder & CEO Alex Mashinsky said in a press release posted late Wednesday. "We have a strong and experienced team in place to lead Celsius through this process.
“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," he continued.
— Celsius (@CelsiusNetwork) July 14, 2022
Celsius says the filing will provide the opportunity to stabilize its business and consummate a comprehensive restructuring that maximizes value for all stakeholders.
According to the release, Celsius and some of its subsidiaries filed "voluntary petitions for reorganization under Chapter 11" in the United States Bankruptcy Court for the Southern District of New York. The company touts "ample liquidity with $167 million in cash to support operations."
Celsius' troubles began after the company paused all customer withdrawals and swaps in June, citing liquidity issues prompting regulators from Alabama, Kentucky, New Jersey, Texas, and Washington to open investigations.
"We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets," the company said at the time. "Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers."
Celsius spent the next month paying back loans and its outstanding debts totaling over $1 billion.
Yesterday, a press release by the Vermont Department of Financial Regulation advised Celsius investors to proceed "with caution," saying the crypto firm is "deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors."
Celsius is not registered to operate in Vermont. The state regulator also advised investors to beware of potential scams and forums encouraging short squeezing of the CEL token.
Last week, Jason Stone, CEO of KeyFi, Inc., filed a lawsuit against Celsius. In the lawsuit, Stone alleges that Celsius used customer funds to "manipulate crypto asset markets, had failed to institute basic accounting controls which endangered those same deposits, and had failed to carry through on promises."
On Sunday, the Wall Street Journal reported that Celsius hired lawyers from Kirkland & Ellis LLP to oversee the company's restructuring plans, which Celsius today confirmed in a release.