The cryptocurrency lending platform Celsius Network owes ten billion dollars to its 1.7 million users, said Alex Mashinsky, CEO and founder.
The cryptocurrency lending platform Celsius Network owes ten billion dollars to its 1.7 million users, said Alex Mashinsky, CEO and founder.
According to a Chapter 11 bankruptcy filing earlier this week, filed by Mashinsky in the U.S. Bankruptcy Court for the Southern District of New York, of the $ 5.5 billion of Celsius’ total liabilities, more than $ 4.7 billion is owed to users.
The UK-based company pays interest on the cryptocurrency deposits, lends them and also sells its own witness, CEL, but froze all activities in mid-June after a particularly tough week for the cryptocurrency.
According to business publication Quartz“Celsius operates as an unregulated bank, attracting customers with surprisingly high rates for cryptocurrency deposits and then transferring those deposits to other customers.”
The platform relied primarily on bitcoin to bet his fortune, and after the token fell sharply last month, the cryptocurrency giant was unable to withdraw money to pay off its debts, which led to it to take the unprecedented step of stopping all withdrawals from the platform three weeks ago.
The broader cryptocurrency market has lost $ 2 trillion ($ 2.9 trillion) since its peak in November last year, while the price of bitcoin has fallen 40 percent in the past 12 months. The price of bitcoin today was A $ 31,566.
In the 61-page court record, Mashinsky attributed the financial problems to market conditions, ill-thought-out bets and mismanagement of the lender’s rapid growth.
“The amount of digital assets on the platform grew more than the company was prepared to deploy,” he stated.
“As a result, the company took what, in retrospect, turned out to be certain deficient asset deployment decisions.”
In a blog post at the time, the company warned that it was “pausing” all withdrawals and transfers between accounts, adding: “Due to extreme market conditions, today we announce that Celsius is putting in pauses all withdrawals, exchanges and transfers between accounts.
“We are taking this action today to put Celsius in a better position to meet, over time, its withdrawal obligations.”
But the terms of use of the platform have raised questions about whether users can recover their cryptocurrency or collateral deposits, with Mashinsky saying the basis of the contract between Celsius and its users explicitly stated that the company also has rights of property on customer deposits. such as the right to assign, sell, transfer or use them for any period of time.
He tweeted two days after the Celsius network was “working non-stop” to solve the problems.
“We are focused on your concerns and grateful to have heard so many,” he said.
“Seeing you come together is a clear sign that our community is the strongest in the world. This is a difficult time; your patience and support means the world to us.”