Embattled crypto lender Celsius informs state regulators that it’s filing for bankruptcy ‘imminently,’ source says

Celsius on Thursday was sued by former investment manager Jason Stone, as pressure continues to mount on the firm amid a crash in cryptocurrency prices. Stone has alleged, among other things, that Celsius CEO Alex Mashinsky (above) was “able to enrich himself considerably.”

A source familiar with the discussions says that Celsius is going to file for Chapter 11.

The company's lawyers were notifying individual U.S. state regulators as of Wednesday evening, according to a source. The person said that Celsius would file the paperwork quickly.

The company froze customer accounts a month ago due to extreme market conditions.

The news is the latest in a long line of bankruptcies.

The hedge fund Three Arrows Capital was exposed to losses that led to the filing of Chapter 11. The fund's remaining assets were frozen this week. The company is in the process of going out of business.

This was anticipated. Joseph Rotunda is the director of enforcement at the Texas State Securities Board.

Celsius did not reply immediately.

As of May, the company had more than $8 billion in loans to clients and $12 billion in assets under management. There were interest-bearing accounts with high yields.

Celsius was sued last week by a former investment manager who claimed the company failed to hedge risk, artificially inflated the price of its own coin, and engaged in activities that amounted to fraud.

Regulators are investigating Celsius. The state of Vermont became the latest to do so. Celsius deployed customer assets in a variety of risky and illiquid investments, trading, and lending activities.

The Vermont Regulator said that Cicero customers did not receive critical disclosures about its financial condition, investing activities, risk factors, and ability to repay its obligations to depositors and other creditor. The assets and investments of the company may not be enough to cover its obligations.