Breaking: Celsius Customers Unlikely To Recover Funds, Here’s Why

By Varinder Singh
Celsius Network Reaches Bankruptcy Court, Crypto Contagion Still In Effect?

Crypto lender Celsius Network has filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of New York, the court filing shows. However, according to the company’s terms and conditions, customers or depositors may not get their money either from deposits or yields.

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Customers in Trouble After Celsius Files For Bankruptcy

According to Celsius’ terms and conditions, digital assets may not be recoverable if the company becomes bankrupt, enters liquidation, or is unable to repay its obligations. It says:

“In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, any Eligible Digital Assets used in the Earn Service or as collateral under the Borrow Service may not be recoverable.”

Also, users may not have any legal options or rights over Celsius to recover their funds. However, Celsius will only be questionable to its creditors under any applicable laws. Moreover, the insolvency-related terms hint total loss of any and all digital assets in Celsius accounts and custody wallets.

The crypto lender and its subsidiaries in the bankruptcy filing have disclosed a total of 50 creditors. The last creditor is a customer with $5,588,694. The lack of details on other customers or depositors having limited money remains unknown.

Some creditors include Pharos USD Fund SP Pharos Fund SP, Sam Bankman-Fried’s owned Alameda Research, B2C2 Ltd, Covario AG, and Invictus Capital. The details of other creditors remain on a file.

The company has updated its FAQs related to the Chapter 11 bankruptcy filing, customer loans, and stakeholders. Also, it aims to provide value for its stakeholders with restructuring, while not seeking to reopen customer withdrawals. Customers with questions may contact the company, and shareholders looking for more details may contact claims agent Stretto.

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Celsius’ CEL Token, stETH and Loans

CEL token price dived from a day high of $0.95 to a low of $0.45 after the announcement. Currently, it is trading near the $0.55 level.

According to blockchain data firm Zapper, Celsius has paid off over $1 billion DeFi loans with Maker, Aave, Compound, and others. The company says it has $167 million cash in hand and proposes to use it to continue operations.

Staked Ethereum (stETH) holdings were sold to Coinbase Custody after repaying its USDC loan completely on Aave. Coinbase Custody’s CEO Ryan Bozarth implies they bought stETH from the crypto lender at discount.

Commenting on the bankruptcy filing, Celsius CEO Alex Mashinsky said:

“This is the right decision for our community and company. 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.”

Here’s what can happen next as Celsius files for bankruptcy and who all can benefit from it.

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Varinder Singh
Varinder has over 10 years of experience and is known as a seasoned leader for his involvement in the fintech sector. With over 5 years dedicated to blockchain, crypto, and Web3 developments, he has experienced two Bitcoin halving events making him key opinion leader in the space. At CoinGape Media, Varinder leads the editorial decisions, spearheading the news team to cover latest updates, markets trends and developments within the crypto industry. The company was recognized as Best Crypto Media Company 2024 for high impact and quality reporting. Being a Master of Technology degree holder, analytics thinker, technology enthusiast, Varinder has shared his knowledge of disruptive technologies in over 5000+ news, articles, and papers.
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