Celsius Hires New Restructuring Lawyers: WSJ
- Crypto lender Celsius has hired new restructuring lawyers as per WSJ
- Celsius is exploring a possible restructuring or bankruptcy filing
Troubled crypto lending platform Celsius is turning to a new legal firm to overcome the ongoing downfall in the market and to position itself as a reliable service once again.
As per a recent report by the Wall Street Journal, Celsius Network has hired the law firm Kirkland & Ellis LLP to smooth the process of restructuring.
According to the “people familiar with the matter,” the company has replaced the prior lead restructuring counsel by hiring new legal firm to advise it on options including a bankruptcy filing. Before this, Celsius hired law firm Akin Gump Strauss Hauer & Feld LLP for the same purpose. Moreover, the company has appointed two new directors last week and is reportedly reshuffling its board.
A firm can reorganize under a court-approved plan known as restructuring in order to pay its creditors within its means. By hiring Kirkland & Ellis LLP, the company aims to ease the financial burden caused by Terra collapse, Lido’s stETH token depegging, and general downturn of the crypto market.
Celsius aims to stand strong
The core of Celsius’ business strategy is to lend crypto at high rates of interest to customers who committed their own funds as liquidity. It pays users annual percentage yields of around 19% on crypto deposits and makes crypto loans as well as cash loans backed by crypto. Its business strategy was inextricably linked to Lido. Users can participate in ETH staking on this platform without supplying the 32 ETH necessary to qualify as an Ethereum validator.
Users who deposit ETH on Lido are given the stETH token in exchange. Each stETH could be exchanged 1:1 for ETH once Ethereum switched to Proof of Stake.
Celsius had a massive amount of stETH in its account. However, following a panic and a postponement of the ETH 2.0 launch announcement, stETH lost its parity and started trading at a lower price. The situation soon became out of control and Celsius had to halt withdrawals on June 12. It cited extreme market conditions and a lack of liquidity brought on by significant redemptions as the major reasons.
Despite obstacles, it appears that the DeFi lending firm continues to resist meeting the same demise as other industry giants like 3AC or Voyager Digital.