Celsius Network Hires Insolvency Experts, Restructure On The Cards

Crypto lender Celsius Network is looking to restructure its operations, following announcements on June 12 that it “[needs] to stabilize liquidity and operations” and take “take steps to preserve and protect assets.”

Celsius Network has hired attorneys Akin Gump Strauss Hauer & Feld LLP to aid in a restructuring process to remedy its financial woes.

The company on Sunday suspended withdrawals, swaps, and transfers amid what it considered to be turbulent market conditions.

Celsius updates

People familiar with the matter told the Wall Street Journal that Celsius is considering alternative financing from investors and is open to a different financial structure. Celsius held approximately $12 billion in assets as of mid-May.

Research firm Nansen fueled speculation in late May that Celsius was partly responsible for the meltdown in TerraUSD, an algorithmic stablecoin that collapsed at the beginning of May.

When the company filed for bankruptcy, Akin Gump previously successfully led a restructuring of Nordic Aviation Capital Designated Activity Company(NAC), the largest lessor of regional aircraft globally. According to a blog post on the company’s website, the law firm acted on behalf of an NAC creditor, the “noteholders of NAC Aviation 29 Designated Activity Company (NAC 29),” according to a blog post on the company’s website. The firms working on NAC’s restructuring won it among the top three restructuring firms in “Global Restructuring Review,” a news and analysis site dedicated to restructuring and insolvency agents.

A spokeswoman for Akin Gump offered no comment on the Celsius arrangement.

New proposed crypto bill protects consumer assets in the event of bankruptcy

A bipartisan Senate duo recently proposed a comprehensive cryptocurrency regulation bill addressing the bankruptcy of crypto firms. The bill seeks to protect investors’ assets from seizure should the company go bankrupt.

This came after Coinbase sent jitters through the cryptocurrency exchange industry by filing a 10-Q quarterly report with the Securities and Exchange Commission in which they said, “In the event of a bankruptcy, the crypto assets we hold in custody on behalf of our customers could be subject to bankruptcy proceedings, and such customers could be treated as our general unsecured creditors.”

CEO Brian Armstrong clarified that the company had “no risk of bankruptcy,” but was compelled by regulators to comply with a new disclosure requirement.

No federal deposit insurance

While it is unclear whether Celsius is on the brink of bankruptcy, the company offers “annual percentage yields” (similar to annual interest in traditional accounts) for crypto deposits in the region of 19%. However, it is not registered with the Federal Deposit Insurance Corporation. This lack of registration could spark fears of customers becoming unsecured creditors, leading to mass withdrawals, and liquidity issues.

The crypto market has already experienced significant selloffs, with bitcoin dropping 30% in just four days, as the market awaits a decision by the Federal Reserve on how much to hike interest rates.