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Bankrupt cryptocurrency lending firm Celsius Network has filed an application to the court for authorization to sell its stablecoin holdings in a bid to generate liquidity to continue its daily operations.
Celsius Network, which is currently in Chapter 11 bankruptcy proceeding before the U.S. Bankruptcy Court for the Southern District of New York has asked the court for permission to sell its stablecoin holdings. It is believed that Celsius holds 11 different stablecoins, amounting to approximately $23 million. If the motion is approved by presiding Judge Martin Glenn, the chief U.S. bankruptcy judge, the proceeding of the sale would go toward funding the firm’s operations “without court or creditor oversight.” Paying back its creditors is an entirely separate ongoing legal process, but the firm’s filings argue that it is in everybody’s interest for Celsius to monetize on its stablecoin holdings in order to continue operations without having to secure additional funding. The court document shows that a hearing is scheduled on October 6 to discuss the proposed sale.
Celsius’ Ongoing Liquidity Crisis
Celsius, which currently finds itself under Chapter 11 bankruptcy proceedings, is just one of the high-profile cases of the ongoing “liquidity crisis” being experienced in the crypto market. When the Terra ecosystem collapsed in May and Terra’s dollar-pegged UST stablecoin lost its peg, many high-profile companies have been forced to file for bankruptcy. Celsius was the first to do so in June, followed by Voyager Capital in July and then Three Arrows Capital.
Celsius said in a September 1 court filing that it was seeking to return some of its customers’ funds. The company said it was prepared to release approximately $50 million in cryptocurrencies belonging to customers who were part of its “custody” program. These are accounts that stored cryptocurrencies but did not generate returns. If the firm’s proposal is approved, the returned funds would cover only a fraction of the lender’s obligations – custody accounts make up $210.02 million in cryptocurrencies, according to the filing. There has however been no mention made of customers who invested in Celsius’ popular “earn” program account which accounts for $4.3 billion in assets.
Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.
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