Ahead of the weekend, crypto lender Celsius filed for Chapter 11 bankruptcy in New York, as a result of the crypto crash.
The company owes its users about $4.7 billion, according to the bankruptcy registry — and it has a deficit of about $1.2 billion, according to the bankruptcy registry. Reuters.
Customers now face an uncertain future, and it is not certain that they will ever get their money back.
This could go on for years, said Daniel Gwin of the New York law firm Ropes & Gray.
bankruptcy after bankruptcy
In June, Celsius’ withdrawal froze, in an attempt to save the company, and the bankruptcy was no surprise. Rival Voyager also filed for bankruptcy earlier this month. Platforms Vauld and Babel Finance have also frozen withdrawals.
“It is very likely that there will be many lawsuits,” Gwin added.
Cryptocurrency lenders have attracted a host of private clients during the pandemic, and they are now in danger of losing everything.
Chapter 11 bankruptcies allow businesses to prepare turnaround plans while they are still operating. Generally, priority is given to repayment to secured creditors, then to unsecured creditors and then to shareholders.
Last time on the list
When Celsius listed its 50 largest creditors, it did not say the order in which they would be repaid, and many of the 1.7 million clients were individual investors.
One of them is Martin Gabo, 27, who owned half a million cents worth of cryptocurrency.
“I think we are at the bottom of the list and I don’t know how I can pay the rent or pay off my car, especially with the other debts I have,” he told Reuters.
Cryptocurrency lenders like Celsius operate in the same way as banks, but unlike regular lenders, there is no safety for investors if the platform goes bankrupt.
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