Company says it was faced with ‘run on the bank’ amid ‘cryptopocalypse’ as investors raced to withdraw assets
The cryptocurrency platform Celsius Network was left with a $1.2bn (£1bn) deficit after suffering from a digital version of an old-fashioned “run on the bank”, according to its bankruptcy filing in the US.
Blaming a combination of its own poor decisions, a global “cryptopocalypse” and unfavourable media coverage, the company filed for Chapter 11 – a US process that allows companies to trade while restructuring their finances.
Celsius froze customer funds last month as investors raced to withdraw their assets, amid a crash that saw the value of cryptocurrencies tumble worldwide.
The filing revealed that the company has $4.3bn of assets, set against liabilities of $5.5bn, of which $4.7bn is owed to its users, who numbered 1.7 million as of this month.
In a 61-page document, its chief executive, Alex Mashinsky, admitted the company had “made what, in hindsight, proved to be certain poor asset deployment decisions”.
These included giving 35,000 of the digital currency Ether to a company called StakeHound, which then lost them due to an alleged error by a third company storing the assets, Fireblocks. StakeHound last month issued a suit in Tel Aviv against the Israel-based firm for negligence, which Fireblocks denies.
Celsius also borrowed from a private lender between 2019 and 2021, only to find when it tried to repay the money that the lender was unable to return the collateral that Celsius had put up to secure the funds.
The cryptocurrency platform, which was valued at $3bn at one point last year, is owed $439m by the lender, $361m of it in cash and the remainder in bitcoin.
Weakened by missteps such as these, Celsius said it had been putting plans in place earlier this year that it believed would have “succeeded in the near future” if the market had not tanked.
Instead, it says in the filing, it was tipped over the edge by a global “cryptopocalypse” as the value of digital assets crumbled in response to “unanticipated” events such as Covid-19 and the war in Ukraine.
The resulting “crypto winter” led to high-profile casualties in the sector, such as the collapse of so-called “stablecoin” terra, Celsius said, fuelling a broader sell-off.
As panicked investors rushed to withdraw their funds, the company said it was hit by an “unexpected and rapid ‘run on the bank’”.
The effect was exacerbated, it claimed, by “misleading” statements in social and traditional media.
Celsius said that filing for Chapter 11 would “provide a breathing spell for the debtors to negotiate and implement a plan that will maximise the value of its business and generate meaningful recoveries to our stakeholders as quickly as possible.”
Mashinsky indicated that its recovery plan could involve using bitcoin generated by its crypto mining operation to plug the shortfall in its crypto assets.


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