A day after submitting for Chapter 11 bankruptcy on Wednesday, Crypto Lender Celsius Network declared a $1.19 billion shortfall on its financial sheet in a bankruptcy court filing on Thursday.
Last month, the New Jersey-based company Celsius halted withdrawals because of “extreme” market conditions, preventing individual investors from accessing their assets and shaking the cryptocurrency market.
Additionally, Celsius stated that it has $40 million in claims against Singapore-based Three Arrows Capital, a cryptocurrency hedge fund that declared bankruptcy earlier this month, in a filing on Thursday with the U.S. Bankruptcy Court for the Southern District of New York.
Approximately 23,000 retail borrowers had outstanding loans from Crypto totaling $411 million as of July 13. These loans were secured by assets with a market value of $765.5 million in digital assets.
During the COVID-19 epidemic, cryptocurrency lenders had a boom, luring depositors with high-interest rates and convenient access to loans that conventional banks seldom ever gave. They profited from the differential by lending tokens to mostly institutional investors.
Read on: Is Cryptocurrency Anonymous
But following a strong cryptocurrency market sell-off sparked by the failure of key coins terraUSD and luna in May, the lenders’ business model came under fire.
This month, Voyager Digital Ltd., a different American cryptocurrency lender, filed for bankruptcy after halting deposits and withdrawals. This month, Vauld, a smaller lender in Singapore, also stopped accepting withdrawals.