Celsius Network: $ 8 Billion Crypto Loans and Bankruptcy

Celsius Network, a cryptocurrency lending company, has just filed for bankruptcy. He has $ 167 million in cash on his account, but experts say it won't help much - people and companies who have entrusted Celsius with their capital can get just one cent for every dollar invested.

The fall of Celsius is primarily the effect of huge drops on cryptocurrency marketinduced by Luna's bankruptcy and its associated algorithmic stablecoin. Previously, prices of digital assets had also fallen - practically since the Russian assault on Ukraine began - but the sell-off accelerated as the Do Kwona project proved unable to cope with high market volatility. Prices of virtually all cryptocurrencies have fallen in recent months, and Bitcoin price (BTC) decreased by 80% from the peak. Altcoins got cheaper for the most part. 

READ NECESSARY: To Kwon, the creator of Luna, forbidden to leave the country

Celsius wanted to be a cryptocurrency bank 

The Celsius Network, which has just announced that it has filed for bankruptcy, failed in such a market. On the one hand, it is quite a surprise, because Celsius was one of the leaders in this market, but on the other hand, such a threat has been talked about for weeks. 

The company, which presented itself as a bank of new, decentralized finance (DeFi), offered high interest rates on deposits that were allocated to loans (at a slightly higher percentage). As long as the market grew, profit could be safely shared between Celsius and the lenders. The trouble started when prices started to fall.

Over a million accounts with billions of USD

The crypto market has been very nervous for several months. The drops verify the possibilities of many companies and projects. The Three Arrows Capital cryptocurrency fund collapsed first, then  crypto market broker Voyager Digital, and a month ago Celsius began to delay and then stop withdrawals altogether, explaining this "Extreme market conditions". 

To visualize how big the problem is, it is worth remembering that it concerned over a million accounts with cryptocurrencies valued at billions of dollars. But their owners will not see them soon, as Celsius has filed for bankruptcy in federal court in New York, which begins a long restructuring process. 

100 thousand creditors, including billionaires

So far, it is known that the company had assets valued at approximately USD 8 billion and a similar amount of liabilities. The company's account has $ 167 million in cash. Meanwhile, according to the Financial Times, there will be up to 100 creditors. 

The Pharos fund from the Cayman Islands, which invested USD 81 million in crypto-loans, placed the most money in Celsius. The CNBC website claims that a large amount of cash was also put in by the billionaire Sam Bankman-Fried, the founder of the FTX cryptocurrency exchange, who invested USD 12 million as part of the Alameda Research trading company. 

Celsius bent the law from the beginning?

As if these troubles were not enough, another lawsuit was filed against Celsius at the beginning of July, and not from just anyone. One of his high-level managers decided to sue his former employer. 

He claims that Celsius did not act on the verge of risk, but did not even protect himself against it. It was also supposed to intentionally and artificially inflate the price of its own token. The lawsuit reached by CNBC explicitly stated that the company dealt with smaller and bigger scams. 

Experts have no illusions that creditors will wait for money for years. Adam Levitin, a law professor at Georgetown University and director of Gordian Crypto Advisors, is confident that they will not get much. 

"- In the end, they'll probably only get a cent for dollar in commitments" - predicts Adam Levitin. 

According to the latest official data from the end of May this year, the Celsius Network granted loans for more than $ 8 billion. It had 1,7 million customers.