Celsius Network: Crypto Firm Reveals $ 1.2 Billion in Bankruptcy Filing | Cryptocurrencies

The cryptocurrency platform Celsius Network was left with a deficit of 1.2 billion dollars (1 billion pounds) after suffering from a digital version of an old-fashioned “run on the bank”, according to its bankruptcy announcement in the US.

Blamed on a combination of its own bad decisions, a global “cryptocurrency” and unfavorable media coverage, the company sought Chapter 11 – a US process that allows companies to trade while restructuring their finances.

Celsius froze customer funds last month as investors rushed to withdraw their assets, amid a crash that saw the value of cryptocurrencies fall worldwide.

The filing revealed that the company has $ 4.3 billion in assets, set against debt of $ 5.5 billion, of which $ 4.7 billion is owed to users, which amounted to $ 1.7 million as of this month.

In a 61-page document, its CEO, Alex Mashinsky, admitted that the company had “taken what later turned out to be certain bad asset distribution decisions”.

These included giving 35,000 of the digital currency Ether to a company called StakeHound, which then lost them due to an alleged error by a third company that stores the assets, Fireblocks. Last month, StakeHound filed a lawsuit in Tel Aviv against the Israel-based company for negligence, which Fireblocks denies.

Celsius also borrowed from a private lender between 2019 and 2021, only to find out when it tried to repay the money that the lender was unable to return the security that Celsius had provided to secure the funds.

The cryptocurrency platform, which was valued at $ 3 billion at some point last year, owes the lender $ 439 million, $ 361 million of it in cash and the rest in bitcoin.

Weakened by mistakes like these, Celsius said they had made plans earlier this year that they thought would have “succeeded in the near future” if the market had not declined.

Instead, the archive says, it was tipped over the edge of a global “cryptocurrency” as the value of digital assets crumbled in response to “unexpected” events such as Covid-19 and the war in Ukraine.

The resulting “crypto winter” led to high-profile damage in the sector, such as the collapse of so-called “stablecoin” terrace, said Celsius, which led to wider sales.

When panicked investors rushed to withdraw their money, the company said it was hit by an “unexpected and rapid ‘run on the bank'”.

The effect was amplified, it claimed, by “misleading” statements in social and traditional media.

Celsius said that filing Chapter 11 would “provide a breath of fresh air for debtors to negotiate and implement a plan that will maximize the value of the business and generate meaningful returns for our stakeholders as quickly as possible.”

Mashinsky indicated that the recovery plan could involve the use of bitcoin generated by cryptocurrency mining to plug the deficit in cryptocurrencies.