The Celsius Network crypto lender recently went bankrupt. He then interrupted withdrawals from his clients, citing “extreme market conditions”. Recently, he filed for protection in federal court for the Southern District of New York. Under bankruptcy law, this request seeks permission to continue operating while restructuring its finances. Now, Celsius users are concerned about how frozen funds will be handled.
Celsius users are perplexed…
According to the document filed with the bankruptcy court, Celsius owes its users more than $4.7 billion. In addition, the value of its assets has fallen by approximately $17.8 billion since March 30, 2022. Indeed, it has fallen from $22.1 billion to approximately $4.3 billion. Celsius succeeded in depositing filing for bankruptcy protection under Chapter 11 for two reasons. The first is that it is a company in financial difficulty. The second reason is that Celsius is an unregistered broker.
This Chapter 11 gives Celsius the right to continue operating while it restructures its finances to pay off debts. If the company had been regulated, it would have no choice but to liquidate. The court would then have sold its assets to pay the creditors. In addition, Chapter 11 of the Bankruptcy Act provides that secured creditors must be repaid before unsecured creditors.
It turns out that according to the Celsius Terms of Service, its clients are unsecured creditors. In this context, users do not know when they will eventually be reimbursed. They know even less if they will be able to recover all of their assets.
As unsecured creditors, Celsius users are in a bind. Disoriented, many of them went to bankruptcy court. Indeed, they ask to recover their funds, stating that they were deceived by the company Celsius.
Source : Forbes
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