Shalini Nagarajan

<div id="highlights-block_62bac1813dbfa" class="highlights">
 <ul>
 <li>Celsius reportedly wants users to activate &#8220;HODL mode&#8221; to win an argument with lawyers</li>
 <li>Withdrawals and transfers on the platform have been frozen since June 12</li>
 </ul>
 
</div>



Embattled crypto lender Celsius Network is hoping that a show of support from its users will save it from bankruptcy.



Celsius, dogged by a liquidity crisis for weeks, has been resisting guidance from its own lawyers to file for Chapter 11 bankruptcy, <a href="https://www.theblock.co/post/154368/celsius-seeks-show-of-client-support-as-lawyers-push-for-chapter-11-bankruptcy" target="_blank" rel="noreferrer noopener">The Block</a> reported on Monday, citing people familiar with the matter.



Under a Chapter 11 bankruptcy, a court helps a business restructure its debt and obligations while it continues to operate — it is also among the most expensive of bankruptcy proceedings.



In a bid to win an internal argument with its lawyers, Celsius now wants to prove that most users would prefer the company dodge bankruptcy altogether.&nbsp;



Users can reportedly demonstrate their support by activating “<a href="https://support.celsius.network/hc/en-us/articles/360007608077-What-is-the-HODL-Mode-" target="_blank" rel="noreferrer noopener">HODL Mode</a>” in their Celsius accounts — a security feature for customers who don’t wish to withdraw or transfer funds for an extended period.



Celsius has <a href="https://cms.blockworks.co/celsius-lending-platform-suspends-withdrawals-and-transfers/" target="_blank" rel="noreferrer noopener">blocked withdrawals</a> and transfers on the platform since June 12, but users can still display trust in the network by initiating the HODL feature, the report said. Despite withdrawal restrictions, Celsius has continued to receive some client deposits.



The company is said to be unable to publicly announce its stance on the matter due to legalities. CEO Alex Mashinsky, who is currently in the US, reportedly isn’t able to comment on the firm’s position either.



Celsius’ situation initially sparked fears the rout might affect other companies in the crypto industry in an already tough market environment. Rival BlockFi was struck by <a href="https://cms.blockworks.co/blockfi-inks-250m-credit-deal-with-ftx-to-ease-liquidity-fears/" target="_blank" rel="noreferrer noopener">liquidity concerns</a> shortly after Celsius as <a href="https://cms.blockworks.co/crypto-fund-three-arrows-capital-facing-potential-insolvency-report/" target="_blank" rel="noreferrer noopener">insolvency rumors swirled</a> around crypto hedge fund firm Three Arrows Capital.



“We are experiencing the biggest crypto crash in history,” Louis Schoeman, managing director at <a href="https://forexsuggest.com/">Forexsuggest</a>, said. “With massive inflation data and the semi-collapse of the Celsius network driving the downward spiral, I think only the best fundamentally strong crypto projects will survive this bear market.”



To explore potential financing options, Celsius has reportedly <a href="https://cms.blockworks.co/celsius-calls-on-citigroup-for-options-after-liquidity-squeeze-report-says/" target="_blank" rel="noreferrer noopener">hired</a> banking giant Citigroup, law firm Akin Gump Strauss Hauer &amp; Feld, and management consultants from Alvarez &amp; Marsal.



<h3 class="wp-block-heading">High yield, high risk</h3>



Launched in 2017, Celsius became popular among retail investors for paying <a href="https://cms.blockworks.co/wheres-the-liquidity-crypto-lending-explained/" target="_blank" rel="noreferrer noopener">lucrative interest rates on crypto</a> as high as 18.6%. The interest rate is earned by allegedly lending cryptocurrency to institutional investors and through decentralized finance protocols.&nbsp;



Celsius would&#8217;ve had to take on severe risk to offer such high returns in a low interest rate environment.



Data on its <a href="https://celsius.network/about-us" target="_blank" rel="noreferrer noopener">website</a>, which calls on users to “Borrow like a Billionaire,” shows the firm lent out more than $8 billion to clients and held nearly $12 billion in assets under management as of May.



“If Celsius is insolvent, it will be a harsh hit to the industry, particularly in terms of the trust of retail investors in the industry alongside a potential contagion across the industry,” Mads Eberhardt, cryptocurrency analyst at Saxo Bank, said.



Celsius’ CEL token currently changes hands for around $0.74, having lost half of its value over the past week, according to data from <a href="https://www.blockworksresearch.com/assets/cel/" target="_blank" rel="noreferrer noopener">Blockworks Research</a>. CEL plunged to $0.24 just after it froze withdrawals — 97% below its record high of $8.05 posted one year earlier.



The troubles at Celsius means the US could soon provide more clarity on regulation towards custodial providers and lenders, said Marcus Sotiriou, analyst at digital asset broker GlobalBlock, in hope of bringing more stability to the crypto space.&nbsp;



Celsius didn’t immediately return Blockworks’ request for comment.



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Celsius Clashes With Lawyers Over Chapter 11 Bankruptcy: Report

Casey Wagner

<div id="highlights-block_62b611d38f195" class="highlights">
 <ul>
 <li>Celsius has hired restructuring consultants from advisory firm Alvarez &amp; Marsal, according to the WSJ</li>
 <li>The last public communication from the Celsius team came via blog post on June 19, one week after it announced the halt</li>
 </ul>
 
</div>



Celsius has hired restructuring consultants in preparation for a potential bankruptcy filing, the Wall Street Journal <a href="https://www.wsj.com/articles/celsius-network-taps-more-advisers-to-prepare-for-potential-bankruptcy-11656088078" target="_blank" rel="noreferrer noopener">reported</a> Friday, citing people familiar with the matter. 



The crypto lending firm — which earlier this month halted withdrawals, swaps and transfers — has reportedly hired three consultants from advisory firm Alvarez &amp; Marsal.&nbsp;



If the lending firm declares bankruptcy, there is no guarantee customers will be able to recover any funds held on the platform.&nbsp;



“In the event that Celsius becomes bankrupt, enters liquidation or is otherwise unable to repay its obligations, you may not be able to recover or regain ownership of such Digital Assets,” Celsius’s terms of use state.



The last public communication from the Celsius team came via <a href="https://blog.celsius.network/a-note-to-the-celsius-community-e5af1f5a7998" target="_blank" rel="noreferrer noopener">blog post</a> on June 19, one week after the halt. 



“As has been a priority since our company’s inception, we maintain an open dialogue with regulators and officials,” the post read. “We plan to continue working with regulators and officials regarding this pause and our company’s determination to find a resolution.”&nbsp;



The post did not address the potential for bankruptcy or the status of consumer funds.&nbsp;



The lender initially halted withdrawals, swaps and transfers in an attempt to “stabilize our liquidity and operations,” amid volatile market conditions, the company said. Celsius has also paused its weekly question and answer sessions with the community until further notice.&nbsp;



Celsius did not immediately respond to a request for comment.



<hr class="wp-block-separator has-alpha-channel-opacity"/>



Start your day with top crypto insights from David Canellis and Katherine Ross. <a href="https://blockworks.co/newsletter/empire">Subscribe to the Empire newsletter</a>.



Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. <a href="https://blockworks.co/newsletter/onthemargin">Subscribe to the Forward Guidance newsletter</a>.



Get alpha directly in your inbox with the <a href="https://blockworks.co/newsletter/research">0xResearch newsletter</a> — market highlights, charts, degen trade ideas, governance updates, and more.



The Lightspeed newsletter is all things Solana, in your inbox, every day. <a href="https://blockworks.co/newsletter/lightspeed">Subscribe to daily Solana news</a> from Jack Kubinec and Jeff Albus.