August 13, 2022

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Source says embattled crypto lender Celsius notifies state regulators that it is filing for ‘imminent’ bankruptcy

Source says embattled crypto lender Celsius notifies state regulators that it is filing for 'imminent' bankruptcy

Celsius was sued Thursday by former investment director Jason Stone, with pressure on the company continuing amid the collapse in cryptocurrency prices. Stone claimed, among other things, that Celsius CEO Alex Mashinsky (above) was “able to enrich himself significantly.”

Piaras Ó Mídheach | Sportsfile for the web summit | Getty Images

Crypto Celsius is in the process of filing for Chapter 11 bankruptcy, according to a source familiar with those discussions.

Lawyers for the company were notifying individual regulators in the US as of Wednesday evening, according to the source, who asked not to be named because the proceedings were private. The person said Celsius plans to file the papers “imminently”.

Hoboken, the New Jersey-based company made headlines a month ago after freezing customer accounts, blaming Severe market conditions.

The news represents the latest high profile crypto bankruptcy with lower prices.

Voyager Foot to protect against Chapter 11 bankruptcy last week, after suffering losses from exposure to the now-defunct hedge fund Three Arrows Capital. A New York bankruptcy court judge froze the fund’s remaining assets this week. Three Arrows is now in the process of liquidation.

said Joseph Rotunda, executive director of the Texas State Securities Board.

Celsius did not immediately respond to CNBC’s request for comment.

The company was one of the largest players in the crypto lending space with over $8 billion in loans to clients and nearly $12 billion in assets under management as of May. Celsius said it had 1.7 million customers as of June. The company offered interest-bearing crypto accounts with returns of up to 17% deposits.

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The company was lawsuit Last week, a former investment manager alleged that Celsius failed to hedge risk, artificially inflated the price of its digital currency, and engaged in activities that amounted to fraud.

Six government regulators have launched investigations into Celsius. Vermont became the last to do so earlier on Wednesday. The state’s Department of Financial Regulation said Celsius had “disseminated client assets into a variety of risky and illiquid investment, trading and lending activities.”

“Celesius’ clients have not received significant disclosures about their financial conditions, investment activities, risk factors, and ability to pay their obligations to depositors and other creditors,” the Vermont regulator said in a statement. “The company’s assets and investments may not be sufficient to cover its existing obligations.”