When crypto-asset lending platform Celsius had suspended customer accounts following a sharp decline in valuations, it sent shockwaves across the nascent crypto sector and understandably raised concerns regarding what actually would happen to client assets should a cryptocurrency platform file for bankruptcy.
At this point, many clients are really starting to wonder/worry about whether they’ll ever be able to recover their assets.
As noted by the WSJ, Alla Driksne said that she had around “six figures” worth of Bitcoin (BTC) and Ethereum (ETH)— reportedly her entire life savings—that was locked up in a Celsius account (not the smartest thing to do …never keep all your eggs in one basket and invest only as much as you can afford to lose, of course).
On June 12, 2022, Celsius abruptly announced that it would be halting client withdrawals, adding it was looking “to stabilize liquidity and operations.”
After this sudden announcement, Driksne claims that she was unable to sleep for a few days.
As reported by Reuters on June 30, retail cryptocurrency lending platform Celsius Network stated this past Thursday it was “exploring options” such as “deals” and also potentially looking into restructuring its liabilities.
Last month, Celsius froze withdrawals and transfers, while claiming the move was due to “extreme” market conditions. This has left around 1.7 million clients now unable to redeem their digital assets.
The Hoboken, New Jersey-based firm is now reportedly working with restructuring consultants from advisory firm Alvarez & Marsal in order to advise them on a potential bankruptcy filing, the WSJ reported last month. This, according to sources familiar with the issue.
As covered, Celsius Network had posted an update of sorts. While disclosing very little, Celsius shared the following comment on its blog:
“Across Celsius today, we are focused and working as quickly as we can to stabilize liquidity and operations, in order to be positioned to share more information with the community. We are operating with the entire community and all clients in mind as we work through these challenging times. We continue to take important steps to preserve and protect assets and explore options available to us. These options include pursuing strategic transactions as well as a restructuring of our liabilities, among other avenues. These exhaustive explorations are complex and take time, but we want the community to know that our teams are working with experts from many different disciplines.”
Celsius, like other crypto platforms, has been hammered by market volatility and a severe decline in value of most digital assets. According to a report by WSJ.com, Celsius was highly leveraged – far beyond what a regulated bank would shoulder.
Rumors have been flying around on crypto Twitter since Celsius slammed the doors on withdrawals. Recently, it has been stated that FTX walked away from a possible deal with Celsius as it has a “$2 billion hole in its balance sheet.” FTX has emerged as the crypto Fed, the lender of last resort, providing capital to several platforms under duress.