Celsius Network, an Israeli fintech startup and unicorn working in the crypto industry has filed for chapter 11 bankruptcy. The decision comes just days after news broke that the company was being sued for millions.
The company’s web site’s home page now has a popup that declares, “Celsius and certain affiliates have filed voluntary petitions for Chapter 11 Bankruptcy relief to stabilize our business and implement a restructuring that maximizes value for all stakeholders.”
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Celsius Networks had already frozen trading a few months ago, meaning that people who invested their cryptocurrencies with the company could not pull their assets to dump as the crypto market crashed. It reportedly has $167 million in cash on hand to use as it tries to restructure in the hope of eventually returning to business as normal.
In a blog post, Celsius said, “Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, Swap, and transfers on its platform to stabilize its business and protect its customers. Without a pause, the acceleration of withdrawals would have allowed certain customers — those who were first to act — to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they receive a recovery.”
The company went on to state that this is the “best opportunity to stabilize the business, consummate a comprehensive restructuring transaction that maximizes value for all stakeholders, and emerge from Chapter 11 positioned for success in the cryptocurrency industry.”
As for the lawsuit, Jason Stone, who managed the KeyFi Inc investment fund together with Celsius Network, filed the lawsuit that accused the company of having defrauded him and of the “gross mismanagement of customer deposits” and being nothing more than a Ponzi scheme. Stone further alleged in his suit that he provided the company with services worth millions of dollars that it never paid out.
A unicorn has folded! This is a really big deal. A unicorn is a company that, while still just a startup, is worth more than $1 billion. There have been a number of recent failures in Startup Nation and even its unicorns are making cutbacks. Next Insurance and Lightricks – both unicorns – recently announced large cutbacks.
There seems to be more bad news for new firms the world over every day now as high inflation and the raising of interest rates by several nations’ central banks, including Israel’s, have sent the markets on a downward spiral.
And it is really no surprise that a crypto company is failing considering that the whole crypto market crashed just a few weeks ago. People should have listened to Warren Buffett.
Cryptocurrencies in general proved to be somewhat of a Ponzi scheme overall as the biggest investors pulled out with their money, thereby causing the crash that left countless people around the world losing a fortune on the cryptos that they continued to hold.
But Celsius Network was not just another crypto exchange/wallet service. It provided financial services whereby people could leverage their crypto investments for the cash needed for other projects. Basically, Celsius gave people a very high interest on their cryptocurrencies to bank with the company while then lending out the cryptos to investors at a much higher rate.
Co-founded in 2017 by Israeli Daniel Leon, President and COO of Celsius, CEO Alex Mashinsky, and CTO Nuke Goldstein, just last October Celsius Network hit a $3 billion valuation when it raised $400 million in new capital. But the company may have just been another house of cards as many in the crypto industry proved to be when the entire crypto market crashed recently.