Crypto Contagion Fears Spread After Celsius Network Freezes
Why has Celsius frozen withdrawals?
Celsius, the embattled cryptocurrency lending provider, has begged users to give it more time to normalize liquidity and operations after the market drop forced the company to suspend customer withdrawals.
What is happening at Celsius Network?
After a months-long struggle with insolvency difficulties, cryptocurrency lender Celsius Network has filed for bankruptcy. Celsius is the third big cryptocurrency company to declare bankruptcy in the last two weeks. As crypto prices fall, exacerbated by inflationary pressures and turbulent market conditions, erode consumer confidence in the industry.
The following is a timeline of events leading up to Celsius’ decision to declare bankruptcy:
Celsius Network’s first sign of trouble comes on April 12, 2022, when it announces that its U.S. platform would begin holding non-accredited investors’ coins in custody, meaning investors will no longer be able to add new assets and earn rewards on Celsius’ Earn platform.
“As previously stated, Celsius has been working closely with regulators all across the world.” “We intend to be as candid as possible with our community,” the corporation stated in a blog post. “In particular, we have been in continuing negotiations with US regulators about our Earn product.” As a result, adjustments will be made to how our Earn product works for users in the United States.”
May 2022. TerraUST (UST) and sibling coin LUNA disintegrate in a $40 billion crash, upsetting the cryptocurrency market and causing $300 billion in losses across the cryptocurrency economy.
The collapse of LUNA and UST erodes consumer trust in the cryptocurrency market, hastening the start of a “crypto winter.” Then an industry-wide sell-off prompts a bank-run-style series of withdrawals by Celsius users.
Later, in bankruptcy proceedings, Celsius blames its liquidity problems on “the domino effect” of LUNA’s demise.
June 12, 2022. In reaction to “extreme market conditions,” Celsius has frozen withdrawals, swaps, and transfers. The corporation provides no date for restoring user services. Now it raised concerns among the platform’s 1.7 million users that their assets may be frozen indefinitely.
Celsius employs restructuring expert Alvarez & Marsal on June 30, 2022, to investigate the firm’s alternatives for mitigating the repercussions from its mid-June plummet.
July 14, 2022: Celsius has a $1.3 billion hole in its balance sheet, according to a court filing from Celsius’ advising partner Kirkland & Ellis. Basically, Celsius disclosed the shortfall in its balance sheet for the first time in the filing.
Is Celsius collapsing?
Celsius was described as an experimental cryptocurrency bank with over one million customers, offering rates of up to 18% to investors willing to lend their cryptocurrency on the platform. As bitcoin prices fell in June, the company declared a liquidity crisis, suspending withdrawals “due to harsh market conditions.”
Celsius went into a tailspin after the revelation, and within a few weeks, it filed for Chapter 11 bankruptcy. According to its bankruptcy declaration, Celsius is on track to run out of funds by October and owes its subscribers almost $4.7 billion.
How do I sue a Celsius Network?
The short answer is that you can submit an arbitration, but not a lawsuit. Celsius has an arbitration provision. However, it is conceivable to contest the enforceability of a clause, such challenges are usually unsuccessful. There is an opt-out provision, but you must do so within 30 days, which most individuals do not do.
But that doesn’t mean you can’t sue them in arbitration. Our law company often represents clients in arbitrations, and lawyers have experience filing arbitrations against financial institutions that refuse to return people’s money. Lawyers take lawsuits against cryptocurrency exchanges and have a number of potential legal claims that we can utilize to try to recover your coins—or compensate you for any damages. False advertising, for example, is one possibility.
How many people lost money in Celsius?
According to their bankruptcy petition, Celsius owes its subscribers approximately $4.7 billion.
According to the lawsuit, Celsius has over 100,000 creditors, some of whom borrowed the platform money with no collateral to back up the deal. Among its top 50 unsecured creditors are Sam Bankman-trading Fried’s firm Alameda Research and a Cayman Islands-based investment firm. Those creditors are likely to be the first in line to receive their funds. They leave smaller retail investors carrying the bag.