A crypto platform used by 1.7 million people is on the brink of collapse as debt piles up to eight figures and all its accounts have been frozen.
A cryptocurrency lending platform with 1.7 million users may be on the brink of collapse.
The Celsius Network pays interest on cryptocurrency deposits, lends them and also sells its own token, CEL, but it froze all activity in mid-June after a particularly tough week for cryptocurrency.
Celsius, a UK-based company, has reportedly laid off 150 employees and has about $80 million in creditors, raising fears it is on its last legs.
When the price of bitcoin plummeted in June amid a massive sell-off amid concerns over an impending financial crisis, the crypto lending giant found itself unable to cough up cash to repay its debts.
Celsius mainly relied on bitcoin to put its fortunes on the line, so after the crypto token dropped drastically last month, the lender suddenly had a hard time as well.
It took the unprecedented step of pausing all recordings on its platform and three weeks later they are still on pause.
In the past five days, Celsius has scraped together a whopping $142.8 million to pay off debt, but is said to owe another $82 million to a creditor called Maker, which sells stablecoins.
The company has lost $667.2 million so far through the crypto bear run, according to CoinTelegraph†
On June 14, bitcoin slipped 15 percent and ethereum fell 16 percent, to a two-year low.
The Celsius Network immediately suspended all withdrawals due to “extreme market conditions” and to date has not reinstated the ability to withdraw funds.
In a blog post, the company warned it was “pausing” all withdrawals and transfers between accounts, adding: “Due to extreme market conditions, we are announcing today that Celsius is pausing all withdrawals, swaps and transfers between accounts.
“We are taking this action today to put Celsius in a better position to meet its withdrawal obligations over time.”
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Alex Mashinsky, the founder and CEO of Celsius, tweeted two days later that the Celsius network is “working non-stop” to resolve the issues.
“We are focused on your concerns and are grateful to have heard from so many,” he said. “Seeing you all come together is a clear sign that our community is the strongest in the world. This is a difficult moment; your patience and support mean the world to us.”
But now, three weeks later, the problem is still unresolved and the network’s 1.7 million users cannot access their funds.
While Celsius still spends rewards on its system, customers cannot cash out either.
US regulators in the states of Texas, Alabama, Kentucky, New Jersey and Washington are investigating the legality of Celsius’s freezing of customer accounts.
US citizen Alla Driksne used her savings to invest in bitcoin and ethereum and has six figures in a Celsius account, but isn’t sure she’ll ever see that money again. Financial news reported†
Celsius has reportedly hired a lawyer to restructure the company.
News.com.au has contacted The Celsius Network for comment.
According to business publication Quartz, “Celsius operates as an unregulated bank, enticing customers with staggering rates for deposits of cryptocurrencies, and then lending those deposits to other customers.”
The publication also said Celsius uses bitcoin to collateralize most of its loans — meaning once bitcoin fell, it had no way to pay creditors.
The broader cryptocurrency market has lost $2 trillion ($2.9 trillion) since its peak in November last year, while the price of bitcoin has fallen 40 percent in the past 12 months.
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