Major Crypto Lender Celsius Files For Bankruptcy

US crypto lender Celsius Network said on Wednesday it had filed for bankruptcy in New York, becoming the latest victim in the cryptocurrency sector of a dramatic drop in token prices.

New Jersey-based Celsius froze withdrawals last month, citing “extreme” market conditions, cutting off access to savings for individual investors and sending jolts through the crypto market.

In a filing in the US Bankruptcy Court for the Southern District of New York, Celsius estimated its assets and liabilities at between US$1 billion and US$10 billion, with more than 100,000 creditors. The company has $167 million in cash.

“This is the right decision for our community and our business,” said Celsius co-founder and CEO Alex Mashinsky.

Crypto lenders such as Celsius have exploded during the COVID-19 pandemic, luring depositors with high interest rates and easy access to loans rarely offered by traditional banks. They lent tokens to mostly institutional investors, profiting from the difference.

But the lenders’ business model has come under scrutiny after a sharp sell-off in the crypto market spurred by the collapse of major tokens terraUSD and luna in May.

Another US crypto lender, Voyager Digital Ltd, filed for bankruptcy this month after suspending withdrawals and deposits. Singapore’s Vauld, a small lender, also froze withdrawals this month.

Celsius said in a statement that it was not seeking permission to authorize customer withdrawals, adding that it had asked the court to allow it to pursue transactions such as employee compensation.

Celsius’ decision in June to freeze withdrawals prompted securities regulators in the states of New Jersey, Texas and Washington to launch investigations into the companies.

Reporting by Maria Ponnezhath in Bangalore; Editing by Sherry Jacob-Phillips and Edmund Blair

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