Struggling crypto lender Celsius has filed for Chapter 11 bankruptcy in the US, which could mean users may not be able to recover their funds.
Court filings show that the crypto lender filed for bankruptcy on July 13.
Alex Mashinsky, CEO of Celsius said this decision aims to restore confidence in the future of the company.
In his words,
We will see this as a defining moment, where acting with determination and confidence served the community and strengthened the future of the company.
No return guarantee
One of the requirements for depositors using Celsius Earn accounts is that the crypto lender owns the funds throughout the lending process.
This means that in the event of bankruptcy, customer funds using Earn accounts may not be recoverable.
The conditions of those who use Custody accounts are not much better. The Custody account does not offer interest and users retain ownership of their funds, but the term of use does not guarantee that users will be able to recover their funds.
It simply states that it is impossible to predict the outcome of insolvency proceedings, which could lead to “the total loss of all digital assets”.
However, Celsius has yet to confirm what his actual move will be. The company said earlier that it would restructure instead of liquidate.
The company also claims to have enough money to repay unsecured creditors, including customers.
Celsius maintains a positive tone
In a blog post Discharged after filing for bankruptcy, the company explained its goals with the Chapter 11 petition, giving examples of other popular companies that have already filed for bankruptcy.
He said the bankruptcy ruling is an attempt to “put forward a plan that restores activity across the platform, returns value to customers and provides choice.”
Celsius hasn’t disclosed how soon its users will be able to get their funds back.
Disgruntled Celsius customers
Most Celsius customers are not happy with the bankruptcy filing, given that they have not been able to withdraw for more than a month now.
Celsius has just confirmed its bankruptcy. Most users will probably never get their money back.
The world runs on contracts and agreements. I’m a big believer in DeFi because it provides certainty that a deal will be honored.
The code is the law is a step forward for society.
— Aylo (@alpha_pls) July 14, 2022
Members of the Crypto community have slammed the company for paying for decentralized protocols while freezing user funds.
Did Celsius pay off its DeFi loans, then withhold client money for bankruptcy protection…I really hope not https://t.co/hohlUgksaW
– pete💎💥💥 (@ProfitFry) July 14, 2022
A Editor revealed that he put his life savings into the business which has now lost everything.
About three months ago, I deposited my savings at Celsius in order to gain some yield while waiting to find a nice apartment to buy for myself. I managed to lose everything.