Celsius was sued Thursday by former investment manager Jason Stone as pressure continues to rise on the company amid falling cryptocurrency prices. Stone has alleged, among other things, that Celsius CEO Alex Mashinsky (above) was “able to get considerably richer.”
Piaras Ó Mídheach Sportsfile for Web Summit | Getty Images
Cryptography company Celsius is in the process of filing for Chapter 11 bankruptcy, according to a source familiar with these discussions.
The company’s lawyers were notifying U.S. state regulators as of Wednesday evening, according to the source, who asked not to be named because the proceedings were private. Celsius plans to present the documentation “imminently,” the person said.
The Hoboken, New Jersey-based company made headlines a month ago after freezing customer accounts, blaming “extreme market conditions.”
The news marks the latest high-profile cryptocurrency bankruptcy as prices plummet.
Voyager applied for Chapter 11 bankruptcy protection last week, after suffering losses due to exposure to the defunct Three Arrows Capital hedge fund. A New York bankruptcy court judge froze the fund’s remaining assets this week. Three Arrows is now in liquidation.
“Unfortunately, this was expected. It was expected. However, it does not stop our investigations. We will continue to investigate the company and work to protect its customers, even through its insolvency,” Joseph said. Rotunda, executive director of Texas. State Board of Securities.
Celsius did not immediately respond to CNBC’s request for comment.
The company was one of the largest players in the cryptocurrency lending space with more than $ 8 billion in customer loans and nearly $ 12 billion in assets managed in May. Celsius said it had 1.7 million customers in June and competed with its accounts that carry interest and returns of up to 17%.
The company would lend customers ’cryptography to counterparties willing to pay a very high interest rate to borrow it. Celsius would then share some of that revenue with users. But the structure collapsed amid a liquidity crisis in the industry.
The company was sued last week by a former investment manager who alleged that Celsius did not cover the risk, artificially inflated the price of its own digital currency and participated in fraudulent activities. .
Six state regulators have already begun investigations into Celsius. Vermont became the last to do so on Wednesday. The state Department of Financial Regulation said Celsius “deployed clients’ assets in a variety of risky and illiquid investment, trading and lending activities.”
“Celsius customers did not receive critical disclosures about their financial condition, investment activities, risk factors and ability to pay their obligations to depositors and other creditors,” the Vermont regulator said in a statement. “The company’s assets and investments are probably inadequate to cover its outstanding obligations.”