Celsius Network Leads Top Crypto Bankruptcy Projects in 2022

The global crypto market has lost $1.2 trillion since April 2022 and several crypto companies are on the verge of bankruptcy.

The latest victim is US crypto lender, Celsius Network, which in July said it had filed for bankruptcy.

Celsius Network is a centralized lending platform that offers yield/interest on various cryptocurrencies including ETH, BTC and many stablecoins up to 17% APY. Users can borrow funds using their crypto as collateral.

According to Reuters, Celsius estimated its assets and liabilities at between $1 billion and $10 billion with more than 100,000 creditors. The company has $167 million in cash.

In June 2022, Celsius made headlines by halting client withdrawals as investors rushed to withdraw their assets, amid an ongoing crash in the crypto market that followed the collapse of major tokens. Terra USD and $LUNA, which started in May 022.

While Celsius has been in the news lately, it’s not the only company that has had to file for bankruptcy amid the ongoing crypto winter.

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SEE ALSO: Bitcoin Price Hits 9-Month Low Amid Terra Volatility

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Here are 3 other companies:

Traveler

One of the most prominent companies to file for bankruptcy is cryptocurrency trading platform, Voyager, which said it was filing in the United States Bankruptcy Court in New York.

The company also offers loans and staking services, which has caused it problems.

According to Stephen Ehrlich, Chief Executive Officer (CEO), Voyager:

“Prolonged volatility and contagion in the crypto markets over the past few months, and the default of Three Arrows Capital (“3AC”) on a loan from the company’s subsidiary, Voyager Digital, LLC, forces us to take deliberate and decisive action now.”

– CEO, Traveler

Based on reportsVoyager appears to have loaned its clients’ funds to crypto hedge fund Three Arrows Capital, also known as 3AC.

However, this fund defaulted in June 2022 on a $667 million loan granted to it by Voyager. Three Arrows Capital itself was forced by a court in the British Virgin Islands to go into liquidation. Faced with this disaster, Voyager suspended deposits, withdrawals and loyalty rewards on its platform.

3AC Capital

In the two bankruptcies above, we can see that companies were ill-prepared for the downturn that emerged in May 2022, generally not being shrewd in their management.

This situation is even more evident in the case of the Singapore-based hedge fund, 3AC Capital.

According to Forbes, 3AC once managed $3 billion, but Singapore’s financial regulators claimed that 3AC was providing false informationand could only manage up to $250 million.

3AC’s problems have been exacerbated by the impact of the sale on its risky investments which would have included overstretched bets on the Grayscale Bitcoin Trust and around $200 million in the now worthless $LUNA.

On June 29, 2022, a court in the British Virgin Islands reportedly ordered 3AC to liquidate its assets finding the company insolvent, and 3AC filed for Chapter 11 bankruptcy on the same day.

It is seen that large loan products promising high returns for depositors are at the center of these bankruptcies.

One of them was Terra LUNA which offered up to 20% APY, and Celsius which offered up to 17% APY. However, these funds by depositors find their way to investment funds like 3AC Capital as can be seen in the case of Voyager lending millions to 3AC.

Don’t forget that 3AC also invested in $LUNA. In this case, faults in one area can easily permeate the entire sector.

Earth

Terra’s collapse occurred due to the destabilization of the $UST peg to the dollar which led to massive conversions from $UST to $LUNA.

The $UST broke free and its price fell 95% from $1 to less than 5 cents in a matter of days. Terra tried to maintain the peg by printing more $LUNA and using its bitcoin stash. However, the death spiral continued until $UST and $LUNA became worthless.

As Peter Yang of Creater Economy puts it, 59 billion dollars evaporated in a few weeks, including $18 billion from the $UST stablecoin. At that time, Bitcoin Magazine predicted that the “contagion” would spread, and it did.

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RECOMMENDED READING: [Q1, 2022] Top 10 Biggest Increases in Crypto

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