Celsius vows to return from bankruptcy but expert fears repeat of Mt Gox

cointelegraph.com:

Crypto lending platform Celsius confirmed on July 13 that it has initiated Chapter 11 bankruptcy proceedings in the Southern District Court of New York.

The announcement was shared on the company’s Twitter and shared with account holders via email on July 13, with a vow to “emerge from Chapter 11 positioned for success in the cryptocurrency industry.”

According to Investopedia, a Chapter 11 bankruptcy allows a company to stay in business and restructure its obligations. Companies that have successfully reorganized under Chapter 11 include American Airlines, Delta, General Motors, Hertz, and Marvel according to an updated FAQ by Celsius.

Danny Talwar, head of tax at crypto accounting software firm Koinly shared his concerns with Cointelegraph that the proceedings could mean investors and customers of Celsius may not see their funds returned for the “foreseeable future,” similar to the fallout from the Mt Gox hack in 2014 which is still ongoing.

“For context, Mt Gox was the largest exchange for Bitcoin from 2010 until its collapse in 2014, losing over 850,000BTC in deposits,” explained Talwar. “Customers are still awaiting the release of funds from the exchange now (in 2022), with court proceedings in multiple jurisdictions globally and in Japan.”

Celsius in a statement on July 13 said it aims to use $167 million in cash-on-hand to continue “certain operations” during the restructuring process and said it intends to eventually “restore activity across the platform” and “return value to customers.”

However, customer withdrawals are set to remain paused “at this time.”

Members of the Celsius board said the move to bankruptcy follows a “difficult but necessary” decision last month to pause withdrawals, swaps and transfers on the