Celsius Networks: cryptocurrency lender files for bankruptcy

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Celcius Network

Celsius Networks cryptocurrency lender files for bankruptcy leading to a wave of digital asset companies that have preserved services and entered restructuring among strong sell-off in cryptocurrencies this year. The Hoboken, company based in New Jersey, which bankruptcy filing comes after a month of clients’ assets were frozen, trapping billions of dollars to more than a million accounts.

As cryptocurrencies have fallen in prices in 2022, lenders contributing on crypto loans have faced cash crunches and customer redemptions, putting them on an unsteady financial place. Some answered by stopping withdrawals, elevating money at bothering prices or entering restructuring proceedings. Celsius said its filing would be a good chance to stabilize its business and go through a restructuring that strengthen value for all stakeholders.

If Celsius hadn’t stopped withdrawals, it would have by time go through a run on its deposits. Customers who would have withdrawn firstly their assets would have been fully paid, leaving others with illiquid and less certain claims, the company said.

Lenders like Celsius took hold of customer deposits and lent the funds with higher interest rates, gaining from the difference. To attract as much investors as possible, Celsius gave high-interest rates and said that the risks were little. But, as it was investigated Celsius went through high financial risks in recent months as the request for loans from institutional investors waned.

Other big digital lenders have experienced an identical fate amid a sharp sell-off in cryptocurrencies and the implosion of a highly leveraged crypto hedge fund, Three Arrows Capital, which filed for bankruptcy this month. Voyager Digital filed for bankruptcy also. Some companies have nearly avoided a similar fate by taking in emergency cash.

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