After persistent efforts to repay its loans, beleaguered crypto lender Celsius Networks decided to file for Chapter 11 bankruptcy on Wednesday, July 13. Following the news, CEL, the native cryptocurrency of Celsius Networks dropped 50% from its intraday high of 95 cents all the way to 45 cents.
As of press time, the CEL token is trading somewhere around 55 cents. As announced by Celsius, the company currently has $167 million cash on hand. Celsius said that this will provide enough liquidity to support operations during the restructuring process.
As per the Chapter 11 bankruptcy rules, the debtor negotiates with the creditor to alter the terms of the loans. Unlike Chapter 7, the good thing here is that the debtor doesn’t need to liquidate its assets.
Celsius said that it will undergo a comprehensive restructuring process to maximize value for all stakeholders. The company filed its bankruptcy in the United States Bankruptcy Court for the Southern District of New York. Speaking on the matter, co-founder and CEO of Celsius, Alex Mashinsky said:
“This is the right decision for our community and company. We have a strong and experienced team in place to lead Celsius through this process. I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.”
Crypto Bankruptcies on the Rise
Bankruptcies in the cryptocurrency space have been on a rise over the last month. Celsius becomes another major crypto firm, after hedge fund Three Arrows Capital, (3AC) and crypto lender Voyager Digital, to file for bankruptcy.
Amid the recent market correction, crypto withdrawals have skyrocketed putting a massive liquidity crunch in the crypto space. As a result of which, lenders have been struggling to pay their customers on withdrawals.
Celsius stopped its withdrawals last month in June. Following it, the company has already paid nearly $800 million of debt to Aave, Compound, and Maker platforms.