News
Celsius Is Accused Of Operating As A “Shadow Bank”
Celsius filing for bankruptcy cleared up a mess. The accusations that the crypto lender is running a “shadow bank” have now been targeted by a prominent crypto critic, Frances Coppola.
Lending company Celsius filed for Chapter 11 bankruptcy earlier this week. The filing revealed a $1.2 billion shortfall on the balance sheet, and this was one of the reasons FTX abandoned the potential acquisition. According to the document, the company now holds $4.3 billion in assets against a whopping $5.5 billion in debt.
Frances Coppola, a prominent economist and longtime crypto critic does not believe that depositors will get their assets back. She accused Celsius of operating as a “shadow bank.”
“Celsius is not an asset manager, it’s a shadow bank. And deposits in banks aren’t even “customer assets”, let alone “assets under management”. They are unsecured loans to the bank. They are thus liabilities of the bank and fully at risk in bankruptcy.”
Cryptocurrency lenders, including Celsius, gained considerable attention during the peak bull period. High-interest rates and easy access to loans have attracted many depositors.
These entities have pocketed profits from digital lending assets due to increased demand from institutional investors. However, their business model was criticized after the market downturn.
Celsius Network has $1.75 billion in crypto as well as $720 million worth of mining assets. Although the lender claims to own $600 million worth of CEL tokens, the shrinking market capitalization and falling price have not helped the company’s difficulties. CEL’s market capitalization has dropped to $185 million.
Industry experts suggest Celsius should opt for the Securities Investor Protection Program (SIP) over Chapter 11 bankruptcy. Swan Bitcoin founder Cory Klippstein also said that the SIP filing would help clients with the rights to own their assets on the platform. During Chapter 11 bankruptcy, Celsius owns these assets.
Klippstein said it would be in the interest of Celsius as well as Voyager Digital’s users, arguing that all of their cryptocurrencies are securities, so they can be the first to get paid.
DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.
Join CoinCu Telegram to keep track of news: https://t.me/coincunews
Follow CoinCu Youtube Channel | Follow CoinCu Facebook page
Harold
CoinCu News
Author: Harold
