Celsius Network, the embattled crypto lender, filed for Chapter 11 bankruptcy Wednesday (July 13) a month after it had frozen customer accounts, according to the company blog.
Celsius had become a big name in crypto lending by offering high returns while suggesting it was less risky than a regular bank.
But the company got into trouble by offering big yields to crypto depositors while making big loans that were backed by insufficient collateral. That left the company vulnerable to a market downturn.
The company froze withdrawals, swaps and transfers in June. The freeze was a “difficult but necessary” step to prevent a run and losses to customers, member of the board of directors said.
Celsius was founded in 2017 by entrepreneur Alex Mashinsky. The company was valued at over $3 billion during its last venture round. Mashinsky said recently that the bankruptcy was “the right decision.”
“This is the right decision for our community and company,” Mashinsky said Wednesday. “I am confident that when we look back at the history of Celsius, we will see this as a defining moment.”
Celsius has also said it won’t seek court approval to allow customer withdrawals. Accounts will remain frozen as the company restructures. Customers could be exposed to losses as unsecured creditors, and their deposits are not federally insured as they would be at a bank.
The WSJ reports that Celsius has $11.8 billion in assets as of May — a decline from $15 billion from October.
See also: Report: Goldman Sachs Seeks $2B to Buy Celsius Assets
PYMNTS wrote recently that Goldman Sachs had been trying to raise $2 billion to buy Celsius’ assets.
The deal would see Goldman buying the assets a big discount if Celsius filed for bankruptcy, which it now has.
Celsius has been taking some measures, including hiring consulting firms and lawyers, to help out with the situation.
Read more: FTX Passed on Celsius After Seeing Balance Sheet
For all PYMNTS crypto coverage, subscribe to the daily Crypto Newsletter.
We’re always on the lookout for opportunities to partner with innovators and disruptors.
Learn More