The bankruptcy of the cryptolending platform Celsius, which found itself in a difficult financial situation, is likelyeverything, inevitably. This opinion was expressed by Adam Levitin, professor of law at Georgetown University.
On June 13, Celsius suspended the withdrawal of funds,exchanges and transfers between accounts “due to extreme market conditions.” However, analysts suggested that the real reason for what happened is a “liquidity crisis,” due to which the company cannot make payments to customers.
Previously, analysts noted that the teamCelsius is strengthening its debt position in three main areas. In the Maker DAO, by increasing the amount of collateral, the platform brought the vault liquidation price to $14,000 per wBTC. Celsius also increased the ETH collateral of its stETH tokenized assets in the Aave protocol and paid off a debt of 2.4 million USDC.
Levtin noted that Celsius management decided to bet on the «resurrection adventure». The lawyer called this standard practice for insolvent companies.
According to Levitin, it was more expensive for Celsius to liquidate the Maker DAO loan than to increase the collateral.
He believes that sooner or later managementplatforms will have to decide to sell liquid assets to recover user funds. Bankruptcy, which the lawyer called almost inevitable, will streamline this process and subsequent litigation.
At the same time, almost all Celsius customers will bein the role of unsecured creditors of the platform, Levitin believes. This means that payments to them will be made from the funds remaining after the repayment of loans secured by collateral and the payment of all administrative costs.
Recall that on May 15, The Wall Street Journal reported that Celsius had hired lawyers from the firm Akin Gump Strauss Hauer & Feld for possible financial restructuring.
The journalists stressed that the initial purpose of the platform is to raise capital from investors.
According to The Block, the company turned to the financial conglomerate Citigroup to solve this problem.