site|engadget

Celsius has filed for bankruptcy protection a month after it paused all customer withdrawals and transfers, according to The Wall Street Journal. The crypto lending giant left almost two million users unable to access their funds back in June due to what it described as “extreme market conditions.” Back then, the company said that freezing withdrawals would help stabilize the liquidity of its assets to, in turn, help it meet withdrawal obligations. 

Celsius was one of the companies caught in the crypto crash, and it saw its token’s value fall from $7 a year ago to $3 by early April this year. Based on the most current information from Coinbase, its token is now worth around 56 cents. As The Journal notes, Celsius offered much better yields than traditional banks to its customers — over 18.6 percent for deposits — and granted large loans backed by little collateral. That left the company with very little wiggle room to move when it felt the effects of the crypto downturn.

The crypto lender’s board of directors explained that pausing withdrawals was difficult but necessary. They said when they filed for bankruptcy:

“Without a pause, the acceleration of withdrawals would have allowed certain customers — those who were first to act — to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term assets before they receive a recovery.”

Since Celsius isn’t seeking court approval for withdrawals, they will likely remain inaccessible as the company restructures under the chapter 11 process. While filing for bankruptcy protects Celsius from some enforcement actions by regulators, though, it will not prevent authorities from investigating the company. Texas State Securities Board’s director of enforcement, Joseph Rotunda, said the agency will continue its probe into the crypto lender. The states of Alabama, Kentucky, New Jersey and Washington are also looking into Celsius after it cut off people’s access to their money.