The cryptocurrency platform Celsius Network was left with a $ 1.2 billion (£ 1 billion) deficit after suffering a digital version of a former “bank run,” according to its U.S. bankruptcy filing.
Blaming a combination of its own poor decisions, a global “cryptopocalypse,” and unfavorable media coverage, the company introduced Chapter 11, an American process that allows companies to trade while restructuring their finances.
Celsius froze client funds last month as investors rushed to withdraw their assets, amid a fall that saw the value of cryptocurrencies fall around the world.
The presentation revealed that the company has $ 4.3 billion in assets, offset by a liability of $ 5.5 billion, of which $ 4.7 billion is owed to its users, which was $ 1.7 million as of this month.
In a 61-page document, its chief executive, Alex Mashinsky, admitted that the company had “taken what, in retrospect, turned out to be certain decisions to deploy deficient assets.”
These included donating 35,000 of the Ether digital currency to a company called StakeHound, which later lost them due to an alleged mistake by a third party company that stored the assets, Fireblocks. Last month, StakeHound filed a lawsuit in Tel Aviv against the Israel-based company for negligence, which Fireblocks denies.
Celsius also applied for a loan from a private lender between 2019 and 2021, only to find when he tried to repay the money that the lender was unable to return the guarantee Celsius had put in to secure the funds.
The cryptocurrency platform, which was valued at $ 3 billion at one point last year, owes the lender $ 439 million, $ 361 million in cash and the rest in bitcoins.
Weakened by missteps like these, Celsius said he had been launching plans earlier this year that he believed they would have “succeeded in the near future” if the market had not collapsed.
Instead, he says in the presentation, he was overwhelmed by a global “cryptopocalypse” as the value of digital assets sank in response to “unforeseen” events such as Covid-19 and the war in Ukraine. .
The resulting “cryptographic winter” caused high-profile casualties in the sector, such as the collapse of so-called “stablecoin” land, Celsius said, fueling wider sales.
When panicked investors rushed to withdraw their funds, the company said it was hit by a “quick and unexpected run in the bank.”
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The effect was exacerbated, he said, by “misleading” statements on social and traditional networks.
Celsius said the Chapter 11 presentation “will provide a respite for debtors to negotiate and implement a plan that maximizes the value of their business and generates significant paybacks for our stakeholders as soon as possible.”
Mashinsky indicated that his recovery plan could involve the use of bitcoins generated by his cryptographic mining operation to cover the deficit of his cryptographic assets.