Piaras Ó Mídheach Sportsfile for Web Summit | Getty Images Crypto firm Celsius is in the process of filing for Chapter 11 bankruptcy, according to a source familiar with the discussions. The company’s lawyers were notifying individual US regulators as of Wednesday afternoon, according to the source, who asked not to be named because the process was private. Kelsius plans to file the paperwork “immediately,” the person said. The Hoboken, New Jersey-based company made headlines a month ago after freezing customer accounts, blaming “extreme market conditions.” The news marks the latest high-profile crypto bankruptcy as prices plummet. Voyager filed for Chapter 11 bankruptcy protection last week after suffering losses from exposure to 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 liquidation. “Unfortunately, this was to be expected. It was to be expected. However, it does not stop our investigations. We will continue to investigate the company and work to protect its customers, even through its insolvency,” said Joseph Rotunda, director of enforcement for law in Texas. State Capital Market Council. Celsius did not immediately respond to CNBC’s request for comment. The company was one of the biggest players in the crypto lending space with more than $8 billion in loans to customers and nearly $12 billion in assets under management as of May. Celsius said it had 1.7 million customers as of June and was competing with interest-bearing accounts and returns of up to 17 percent. The company would lend customers’ cryptocurrency to counterparties willing to pay an extremely high interest rate to borrow it. Kelsiou will then share a portion of these revenues with users. But the structure collapsed amid a liquidity crisis in the industry. The company was sued last week by a former investment manager who claimed Celsius failed to hedge risk, artificially inflated the price of its own digital currency and engaged in activities that amounted to fraud. Six state regulators have already launched investigations into Celsius. Vermont became the latest to do so earlier Wednesday. The state’s Department of Financial Regulation said Celsius “deployed client assets in a variety of risky and illiquid investment, trading and lending activities.” “Celsius’ customers did not receive critical disclosures about their financial condition, investment activities, risk factors and ability to repay their obligations to depositors and other creditors,” the Vermont regulator said in a statement. “The company’s assets and investments are probably insufficient to cover its outstanding liabilities.”
