The Celsius platform is bankrupt. The crypto-bank, which has promised its customers insane earnings, has not been able to resist the tornado that is blowing in the market.
Celsius filed for bankruptcy in a New York court. The platform specialized in the lending of cryptocurrencies has positioned itself under the tutelage of “Chapter 11”, the American bankruptcy system.
Celsius is a heavyweight in the cryptocurrency universe. The platform attracted 1.7 million customers. Last May, it claimed $ 12 billion in assets under management. Its main business is cryptocurrency lending.. Clients deposit their cryptocurrencies on the platform. In return they receive interest. It is a crypto bank.
If the platform has attracted so many customers, it is because Celsius remunerates their deposits in a very fragrant way. On its website, the platform promised annual returns of up to 18%. As long as the cryptocurrency market was euphoric, everything was fine. With cryptocurrencies deposited in his accounts, Celsius could buy other virtual currencies and make beautiful trades. The depositors received their interest and did not complain.
Celsius appears to have made poor investments in recent months with the funds of its clients. The crypto-bank was heavily exposed to the Eartha stablecoin (stable cryptocurrency) that totally collapsed last May. The same misfortune happened to him with the sETH. Even this asset, whose price was supposed to match that of ethereum, the second cryptocurrency in circulation behind bitcoin, suddenly fell.
Ultimately, the platform simply doesn’t have the funds to pay back its customers. His cash flow problems led to his loss. This is what happened last week at Voyager Digital, another crypto bank. Platforms Vauld, CoinFlex and Babel Finance suffer similar setbacks and they also have frozen withdrawals.
“There is no cryptocurrency miracle. The basic economic logic is the same as in the traditional market. You have to be able to honor your commitments.”
“There is no such thing as cryptocurrency miracle. The basic economic rationale is the same as in the traditional market. You need to be able to honor your commitments and therefore have enough capital to repay your customers when the market changes. Risk management in Celsius obviously had some shortcomings“, Analyzes Kevin de Patoul, CEO of the Keyrock scale-up in Brussels, which works with the main cryptographic platforms.
No safety net
Celsius is now trying to recover cash by selling its positions. The platform announced that it has released $ 167 million. This sum will be used to ensure the business continuity of the company and to pay its employees. Customers, who are not priority creditors, will have to wait. In the deregulated world of cryptocurrencies, they have no guarantee that they will get their money back. When a bank goes bankrupt, depositors are covered up to € 100,000. When a crypto bank goes bankrupt, there is no safety net.
- The Celsius platform is bankrupt.
- The crypto-bank has promised its customers insane returns, which could rise up to 18% year-on-year.
- It couldn’t resist the tornado blowing on the cryptocurrency market.
- His cash flow problems led to his loss.