Celsius is presently investigating all possibilities to avoid insolvency, including consulting restructuring attorneys to address its financial issues. This also includes appointing Citigroup to assist with possible financial choices and suspending withdrawals and transfers on the platform.
Still, many crypto professionals and research organizations believe that poor risk management, unfavorable market circumstances, and stETH depeg will put Celsius in a more difficult position.
It appears that using its considerable stETH holdings as security to create liquidity is the only alternative.
Celsius Running out of options
Due to financial restrictions in these difficult market conditions, Celsius Network is now under pressure. Moreover, according to Bloomberg today, the company lacks alternatives to avoid bankruptcy.
As per cryptocurrency research firm Kaiko, Lido’s stETH depeg from ETH, direct risks to Terra, and unfavorable market circumstances hampered Celsius. Celsius, a cryptocurrency lender, is one of the significant stETH holders on Lido.
The crypto credit company manages customers’ money when invested in stETH. According to Dune Analytics, Celsius owns around $500 million in stETH. However, it would not be practical to trade large amounts on the open market to repay withdrawals.
Celsius and Three Arrows Capital suffer liquidation threats as they unload stETH in smaller sums to control liquidity and debts. The sole alternative is using stETH or other holdings as collateral for an over-the-counter deal with a cryptocurrency exchange or professional trader.
Network faces legal action
Ben Armstrong, the creator of BitBoyCrypto.com, is preparing legal action against Celsius. According to him, the restructuring lawyers hired by Celsius mainly prepare companies for bankruptcy. However, he has spoken to several lawyers who believe the chances of remaining solvent are slim. As a result, Celsius’ only choice is bankruptcy, which would instantly end any lawsuit against the company.
He claims that other individuals have contacted him asking to add them as complainants, but it is not feasible at this moment. In addition, he has recommended small investors with less than $10,000-$25,000 in Celsius file complaints in small claims court shortly before the company declares bankruptcy.
