Three major crypto firms have filed for bankruptcy in the past few weeks. The latest and largest of the three, Celsius Network, filed for bankruptcy under Chapter 11 in the Southern District of New York.
“I am confident that when we look back at the history of Celsius, we will see this as a defining moment,” Alex Mashinsky, Celsius’ co-founder and CEO, said in a release.
Celsius joins crypto firms Three Arrows Capital and Voyager Digital in the growing list of crypto companies facing solvency issues.
Substantial investments in the collapsed stablecoin TerraUSD seemed to play a significant role in these firms’ decline. After the collapse of Terraform Labs algorithmic stablecoin, many of the crypto firms that faced financial issues had direct investments in TerraUSD or its cryptocurrency counterpart Luna.
Celsius offered both retail and institutional customers high-yield interest savings accounts which earned yield for customers by lending its assets out to hedge funds or depositing them in higher risk decentralized finance trades that relied on additional leverage.
Last month, Celsius began showing signs of instability, freezing customer accounts on its platform. In some cases, this resulted in customers losing their funds because they were unable to make payment on their crypto loans. Celsius also went through a round of layoffs, resulting in over 150 employees being let go.
Celsius also is facing a lawsuit from one of its major asset managers, KeyFi, which alleged it lost approximately $350 million. In the complaint, Celsius is accused of being a “fraud” and a “Ponzi scheme.”
The celsius token, CEL, has fallen more than 32 percent following the bankruptcy announcement, trading at 46 cents per coin. At the start of May, its value was above two dollars per coin.