Celsius Suspends Withdrawals Amid Cryptocurrency Market Meltdown | Seward & Kissel LLP – JDSupra – JD Supra

[co-author: Kelly Garretson]*

In a blog post on June 12th, 2022, Celsius announced that it was suspending “all withdrawals, Swap, and transfers between accounts … to put Celsius in a better position to honor, over time, its withdrawal obligations” amid recent market volatility. This announcement sparked a huge selloff in the cryptocurrency market, causing the market cap to fall below $1 trillion with Bitcoin dropping to its lowest price in nearly 18 months and Ethereum dropping as low as $1,096.24 on June 13th, 2022. The decline in the cryptocurrency market is also fueled by the tight monetary policy expected to come out of the Federal Reserve on June 15th to combat inflation.

Celsius claims to hold over $11.82 billion in assets as of May 17, 2022, servicing over two million community members on its cryptocurrency “interest income and lending platform.” Following the suspension announcement, the value of Celsius’ own cryptocurrency (CEL) was cut in half. Nexo, another crypto lender, regarded the event as a signal of Celsius’ insolvency and posted a letter of intent to acquire certain Celsius assets on Twitter. This frenzy is heightened by last month’s SEC disclosure by Coinbase, a crypto exchange platform, which noted that Coinbase’s customers may be treated as “general unsecured creditors” and its “custodially held crypto assets” treated as “property of a bankruptcy estate” should the company face insolvency, spotlighting the risk faced by Coinbase’s crypto customers.

Some players see current market conditions as a “crypto winter” causing major freezes in hiring and declines in value, exemplified by Coinbase who announced plans to lay off 18% of its workforce on June 14th. Other players see opportunity for growth, like Changpeng Zhao, CEO of Binance, who recently stated that “if we are in a crypto winter, we will leverage that, we will use that to the max,” and that Binance was “kicking into high gear in terms of M&A activity.”

LEGAL TOKENS

Celsius’ suspension of withdrawals, like Coinbase’s disclosure statements, underscores that the cryptocurrency industry must find a way to insolvency-proof the assets of cryptocurrency investors.

Further, with the Federal Reserve’s recent interest rate hike, the problems in the cryptocurrency industry exposed by present market volatility are surely not going anywhere.

*Summer Associate

Source: https://www.jdsupra.com/legalnews/celsius-suspends-withdrawals-amid-1940024/