Over 2 million customers risk their funds, something must be done and fast.

Celsius Network declares bankruptcy

Celsius Network, one of the most quoted platforms in the world for the management of crypto assets, recently declared bankruptcy in the United States, the same fate that happened to other crypto trading companies that were annihilated by the wave of sales that hit cryptocurrencies in the last period, one above all the Bitcoin.

A winding road that forced the company to take drastic measures such as the Chapter 11 appeal, communicated a month after Celsius Network took steps to freeze the assets of its customers claiming that this procedure is “an opportunity to stabilize the company” with a significant restructuring aimed at maximizing value for all interested parties.

Details of the bankruptcy procedure and mass layoffs

In a delicate situation, 150 employees were dismissed with subsequent bankruptcy declaration in the United States.

According to reliable sources, the bankruptcy procedure initiated by the company is voluntary.

The first step for a hypothetical total recovery.

The legal team in charge, after having delivered the books in court, initiated a procedure that in the United States is called Chapter 11.

The “Chapter 11” procedure in the US is a very expensive and complicated corporate reorganization measure maneuvered by the court, which takes into account both the plans requested by creditors and those proposed by the company.

However, this provision does not allow the liquidation of the assets nor the subsequent payment of creditors.

In short, no certainty for creditors eager for liquidity, but in any case an important maneuver for the future of the company and for a solution to this catastrophic situation.

  1. Chapter 11 is a rather lengthy procedure, often used in similar cases.
  2. Offers companies the opportunity to continue to work in an effort to complete the recovery plan.
  3. This procedure does not provide for immediate liquidation, therefore creditors will not be able to access their funds.
  4. The restructuring of the debt plan and bringing the company back to the positive are the main objectives to be achieved. Celsius said it has $ 167 million in cash, which will provide the liquidity needed to conduct certain operations during the restructuring process.

The famous co-founder and CEO of the company Alex Mashinsky, said that the decisions made, while difficult, are believed to be right for both the community and the company.

Furthermore, Alex Mashinsky signed an official document in which he certifies that the company, through an operation called “Bitcoin Celsius Mining”, would have the ability to sell mined Bitcoin (BTC) on the market in order to generate sufficient assets that would be used for the settlement of at least one of its debts, thereby generating considerable income in the near future (it is assumed that 15,000 BTC can be generated up to 2023).

Strong criticism has been leveled by the founder of Swan Bitcoin, Cory Klippstein, who believes the decision taken by Celsius and Voyager to file for Chapter 11 protection is wrong. According to Klippstein, it was the Securities Investor Protection Act (SIPA).

But let’s get to the numbers …

To “quantize” the damages, the bankruptcy procedure revealed, in addition to other problems, a budget gap equal to 1.2 billion dollars consisting largely of user deposits, about 4.3 billion dollars of assets compared to $ 5.5 billion in liabilities.

  1. Most of the liabilities arise from user deposits ($ 4.72 billion)
  2. Negative balance of $ 1.2 billion.
  3. Asset Celsius: $ 600 million CEL token, $ 720 million mining, $ 1.75 billion crypto assets.
  4. After the suspension of any withdrawals by creditors, the platform was valued at $ 3.25 billion.

According to the most pessimistic, since most of the liabilities are made up of customer deposits, they will never be returned.

Difficult and complicated circumstances

The situation is not at all easy to solve. Bankruptcy procedures of this magnitude involve countless unknowns, such as reaching a positive balance sheet and paying off debts in the shortest possible time. Everything will be handled by the court in charge which will have about six months for a first decisive maneuver.

The creditors (most of them customers) are expecting news on how they will have to act.

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