Since they do not have money to respond to creditors, it has had to suspend all withdrawals. Accelerating withdrawals would have allowed some customers to receive full payment, but others would have to wait in line.
The financial crisis dominating the crypto space has led Celsius Network, a blockchain-based financing network, to file for bankruptcy. Its native token, CEL, has lost half its value following the suspension of withdrawals, swaps, and transfers.
That situation has caused some of those investing in Celsius to lose their life savings.
Millions of investors are currently on a sinking ship and unsure when they will resume business. Besides, the recent events have discouraged investors, although Celsius Network asserted it would allow withdrawals.
CEL, the native cryptocurrency of Celsius Network, had large capital outflows due to the problems with the company. Its market capitalization has decreased by 85% since 2021, going from USD 1.06 billion in January to USD 0.15 billion in July.
Even though holders have made their best effort, the price of CEL has suffered significant losses. They wanted the cryptocurrency to resume its highs to save the collapsing society, but that did not seem to happen.
The Factors Leading Celsius Network to Declare Bankruptcy
Celsius Network recently stated that it had filed for voluntary bankruptcy to allow the company to stabilize its operations. Besides, they said they sought to complete a comprehensive restructuring operation that maximizes value for all stakeholders.
Since Celsius Network does not have money to make payments to its creditors, it is struggling to survive. That caused them to suspend all withdrawals, swaps, and transfers as a drastic measure.
Report on the Withdrawals by the Customers of Celsius Network
The firm provided a report on the withdrawals by its customers, but it is not a good one.
The Board of Directors of Celsius Network stated that the deposit includes their decision to suspend withdrawals to protect their customers. They explained that accelerating withdrawals would have allowed some clients to receive full payment. However, others would have to wait for Celsius to recover the value of the distribution of long-term assets.
Financial research firm Finbold reported that the company had fully paid off its Bitcoin mortgage, although user money remained locked up.
Furthermore, a former employee sued Celsius Network, claiming the company ran a Ponzi scheme. He said they could not provide adequate collateral for their clients.
Celsius Networks to Not Allow Withdrawing Money Yet
The company said it would not yet allow its customers to withdraw their funds yet. Their bankruptcy filing will cause their creditors to wait in line to collect the money owed.
Celsius Network depends on approval from the judge to act after filing for bankruptcy.
In addition, Celsius Network said that it will not yet request permission to allow customer withdrawals. They said they would use Chapter 11 procedures to address customer complaints instead.
CEL is trading at around USD 0.747 and has accumulated a 5.5% loss over the last 24 hours. While its daily trading volume is above USD 9.24 million, its market capitalization is about USD 309.67 million, according to CoinGecko.
By Alexander Salazar
