The Fall of Celsius Network: A Timeline of the Crypto Lender’s Descent Into Insolvency

A timeline of Celsius’ battle with insolvency during the crypto crash, from the firm’s decision to limit some user activity before the “pause,” to its decision to file for bankruptcy on the advice of restructuring experts.

AccessTimeIconJul 15, 2022 at 4:23 p.m. UTC
Updated May 11, 2023 at 5:22 p.m. UTC
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After a months-long battle with insolvency issues, crypto lender Celsius Network has initiated bankruptcy proceedings. Celsius is the third major crypto company to file for bankruptcy within the past two weeks as plummeting crypto prices buffeted by inflationary pressures and volatile market conditions cause consumer confidence in the industry to nosedive.

Here’s a timeline of events leading up to Celsius’ move to file for bankruptcy:

April 12, 2022: Celsius Network shows its first sign of distress by announcing its U.S. platform will begin holding non-accredited investors’ coins in custody, where investors will no longer be able to add new assets and earn rewards on Celsius’ Earn platform.

“As we previously have acknowledged, Celsius has been working closely with regulators around the world. It is our intention to be as transparent with our community as possible,” the company said in a blog post. “More specifically, we have been in ongoing discussions with United States regulators regarding our Earn product. As a result, there will be changes to the way our Earn product will work for users based in the United States.”

May, 2022: Algorithmic stablecoin terraUST (UST) and sister coin LUNA implode in a $40 billion collapse, disrupting the cryptocurrency market and spurring $300 billion in losses across the cryptocurrency economy.

The implosion of LUNA and UST damages consumer confidence in the crypto market, accelerating the onset of a “crypto winter” and an industry-wide sell-off that spurs a bank run-style series of withdrawals by Celsius users.

Later, in its bankruptcy filings, Celsius attributes its liquidity woes to “the domino effect” of LUNA’s collapse.

June 12, 2022: Celsius freezes withdrawals, swaps and transfers in response to “extreme market conditions,” fueling rumors that the platform has become deeply insolvent. The company reveals no timeline to restore user services, stoking fears among the platform’s 1.7 million users that their assets will remain frozen indefinitely.

June 30, 2022: Celsius hires restructuring expert Alvarez & Marsal to explore the firm’s options to mitigate the fallout of its mid-June swoon.

“Across Celsius today we are focused and working as quickly as we can to stabilize liquidity and operations, in order to be positioned to share more information with the community,” the firm wrote in a blog post.

July 3, 2022: Celsius lays off about 23% of its workforce, a month after pausing user withdrawals and transfers, as the company faces mounting liquidity issues.

​​"We are operating with the entire community and all clients in mind as we work through these challenging times," Celsius wrote in a blogpost.

July 7, 2022: Decentralized Finance (DeFi) aggregator KeyFi files a lawsuit in the New York State Supreme Court, alleging Celsius engaged in market manipulation and failed to implement basic accounting controls to protect user deposits.

That same day, KeyFi CEO Jason Stone takes to Twitter to accuse Celsius of lying about its lack of investment strategy and oversight.

“They had not been hedging our activities, nor had they been hedging the fluctuations in crypto asset prices,” Stone tweeted. “The entire company’s portfolio had naked exposure to the market."

Stone also accuses the firm of operating like a ponzi scheme and cheating him out of potentially hundreds of millions of dollars in pay.

July 12, 2022: Celsius' wallet transfers $8.4 million in Circle’s USDC stablecoin to DeFi lending protocol Aave, closing Celsius' loan and freeing up the remainder of tokens pledged as collateral against Celsius’ debt, including some $10 million in stETH, a derivative type of the ether (ETH) token, $13 million in Chainlink's LINK tokens and $3 million in Synthetix's SNX.

July 13, 2022: Celsius Network files for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.

“Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps and transfers on its platform to stabilize its business and protect its customers,” the company wrote in a statement. “Without a pause, the acceleration of withdrawals would have allowed certain customers – those who were first to act – to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they receive a recovery.”

July 14, 2022: A court filing from Celsius' advisory partner Kirkland & Ellis reveals Celsius has a $1.3 billion hole in its balance sheet. The filing marks the first time Celsius has acknowledged the hole in its balance sheet.

This is a developing story. We will update this timeline as more developments come to light.

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CoinDesk is an award-winning media outlet that covers the cryptocurrency industry. Its journalists abide by a strict set of editorial policies. In November 2023, CoinDesk was acquired by the Bullish group, owner of Bullish, a regulated, digital assets exchange. The Bullish group is majority-owned by Block.one; both companies have interests in a variety of blockchain and digital asset businesses and significant holdings of digital assets, including bitcoin. CoinDesk operates as an independent subsidiary with an editorial committee to protect journalistic independence. CoinDesk employees, including journalists, may receive options in the Bullish group as part of their compensation.

Elizabeth Napolitano

Elizabeth Napolitano was a news reporter at CoinDesk.


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