Citing “extreme” market conditions, cryptocurrency lending giant Celsius – which opened a Tampa office in September 2021 – announced a pause of all withdrawals, swaps and transfers between accounts.
Following Sunday’s shocking announcement, the Wall Street Journal reported Wednesday the company hired restructuring attorneys from the law firm Akin Gump Strauss Hauer & Feld to help with its increasing financial troubles. Citing “people familiar with the matter,” the publication said Celsius would first look to investors for financing options. However, the New Jersey-based firm is not ruling out other alternatives, such as financial restructuring.
After going silent on Monday, Celsius released two statements via Twitter.
“Celsius Network is working as quickly as possible and will share information as and when it becomes appropriate,” read the first tweet. “Acting in the interest of our community remains our top priority.”
Later that afternoon, the company wrote it is “working around the clock for our community,” adding that “it’s all hands on deck, so there will be no Twitter Spaces this week.”
Before the pause, Celsius claimed it had a user base of 1.7 million people seeking high yields of up to 18% on deposits. According to its website, the lender employs “military-grade security” and “next-level transparency.” The lender also boasts $750 million in insurance, and that it recovered $50 million in users’ funds.
However, many replies to its latest Twitter statement tell a different story.
One user asked if the company had already laid off its customer service staff after waiting 48 hours for a support reply. Another said, “we are desperate, and you guys are leaving us blindly … there is no one on the other end responding to us. This is our lives you guys are playing with … please communicate with us.”
Not all the messages were negative, with some users remaining supportive of the company and encouraging their colleagues not to contribute to the problem by withdrawing funds when the accounts reopen.
In Sunday’s announcement of the pause, the company, which managed $11.8 billion in assets as of May 17, said it would “put Celsius in a better position to honor, over time, its withdrawal obligations.”
Celsius’ troubles mirror much of the larger crypto market. The two largest digital currencies by market cap, Bitcoin and Ethereum, are down nearly 50% and 60%, respectively, over the last year. In May, the popular token Luna and its associated TerraUSD stablecoin collapsed after Terra failed to keep the $1 peg it is supposed to maintain.
“We are taking this necessary action for the benefit of our entire community in order to stabilize liquidity and operations while we take steps to preserve and protect assets,” read the announcement. “Furthermore, customers will continue to accrue rewards during the pause in line with our commitment to our customers.”
Celsius offers high rates to customers who deposit cryptocurrencies into its platform by lending the assets to other firms and earning a return.
According to Decrypt, Celsius reached a valuation of $3.5 billion after raising $750 million in a Series B funding round last November. Around the same time, the company sponsored the Florida Bitcoin & Blockchain Summit at Amalie Arena. During the summit, Tampa Mayor Jane Castor announced she would accept a portion of her salary in bitcoin.
Celsius offered to facilitate the transaction.
The crypto platform, incorporated in London and, according to its website, employs 200 people across offices in New Jersey, Israel, Greece and Serbia. In May 2021, Nuke Goldstein, the company’s co-founder and CEO, moved to Tampa, and opened a local office in September. Goldstein previously announced plans for Celsius to hire 100 local employees for its downtown Tampa location.
It is unclear how the platform’s financial troubles will affect the local office, and Goldstein directed a request for comment to the company’s public relations officer. As of press time, the contact did not respond to the Catalyst’s request for comment.
What is clear are the effects the announcement had on the crypto market.
After Celsius announced its pause, bitcoin hit an 18-month low of $22,725. Ether dropped to $1,176, its lowest point since January 2021. According to CoinGecko data, the Celsius token, CEL, has dropped by 91.5% over the last year. The digital currency fell from $7 to around 20 cents over the last 12 months, and disallowing withdrawals keeps customers from liquidating their accounts.
“There is a lot of work ahead as we consider various options,” read Sunday’s statement. “This process will take time, and there may be delays.”