Celsius seeks show of client support as lawyers push for Chapter 11 bankruptcy

Quick Take

  • Lawyers hired by crypto lender Celsius are advocating for Chapter 11 bankruptcy, according to people with knowledge of the situation.
  • But executives at the firm believe many of its clients would prefer Celsius to avoid lengthy and painful bankruptcy proceedings.

Embattled crypto lender Celsius Network is resisting a recommendation from its own lawyers to file for Chapter 11 bankruptcy — and seeking a show of support from users to help win the internal argument against the suits.

With the company’s management prevented from making any public pronouncements due to legal advice, Celsius believes many of its retail clients would prefer the firm to avoid bankruptcy, according to people with knowledge of the situation. To that end, users can show their support by engaging “HODL Mode” in their Celsius account, said the people.

Celsius didn’t respond to a request for comment. 

Celsius’s move is a last throw of the dice as it teeters on the edge of bankruptcy after being forced to freeze client withdrawals on June 12. The company, which offers retail investors returns on their crypto holdings and held more than $10 billion of client assets, found itself unable to honor its obligations as crypto markets cratered in recent weeks.

Amid the fallout, The Block reported that Celsius has appointed Wall Street giant Citigroup to advise on its financial options and The Wall Street Journal said the lender is working with lawyers from Akin Gump Strauss Hauer & Feld and restructuring-focused management consultants from Alvarez & Marsal. 

Celsius describes HODL Mode on its website as a “security feature that gives you the ability to temporarily disable outgoing transactions from your Celsius account.” When activated, clients are unable to withdraw or send funds. After deactivation, users must wait 24 hours before these abilities are reinstated. 

As clients are currently blocked from withdrawing or transferring funds anyway, this will have no practical effect on users, but — according to the people — it will help show the lawyers the strength of feeling that exists among users. They added that Celsius is still receiving some client deposits despite the ban on withdrawals. 

Friday ask-me-anything

Being advised to refrain from public statements puts Celsius in a novel situation. The firm’s CEO, Alex Mashinsky, has for years held a regular “ask me anything” event on Fridays to field questions from clients and holders of Celsius’s native CEL token. 

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