Celsius Chapter 11 bankruptcy means customers may never get crypto back

The sinking price of an ether token helped push the Celsius Network into a liquidity crisis.

Alex Mashinsky, CEO of Celsius, said in a statement that they would see this as a defining moment, where acting with resolve and confidence would serve the community and strengthen the company.

Many members of that community may be in a state of panic. Users whose funds have been locked on the platform since June 12 are probably wondering if they will ever see their money again.

User deposits are not guaranteed in the event of insolvency according to the terms of use. Celsius ownership of their funds as a condition of use is made clear in the fine print of the company's website. In the event of a bankruptcy, assets may not be recovered according to its terms of use.

Customers using Celsius's "Custody" accounts, which don't pay interest, retain ownership of their funds, but the lender doesn't guarantee users will get their money back in the event of a bankruptcy The results of an insolvency proceeding can't be predicted and might result in the total loss of Digital Assets, according to the terms of use.

Users may get some of their assets back if Celsius restructures rather than liquidates. The lender claimed in its petition that it has funds to distribute to its customers.

Celsius leadership paid back debts to other finance services before restoring access to customers and customers were dismayed at the prospect of losing their savings

Three months ago I deposited my life savings to Celsius in order to earn yield while waiting to find an apartment for myself. I've lost it all. I won't be the same person after this.

Celsius did not reply immediately. In a Wednesday post, Celsius said that it hoped to put forward a plan that would restore activity across the platform, return value to customers, and provide choices.

There was a Chapter 11 petition filed by Celsius. On July 1st, withdrawals were frozen after Three Arrows Capital failed to repay a loan from the exchange. Celsius customers are also in a similar situation. If customers recover their holdings, the money may not be in the same kind of currency they deposited it in, because the company expects them to be impaired from bankruptcies.

In the event of insolvency, the users of the exchange will be treated as generalUnsecured Creditors, who are usually compensated last if at all.

Customer funds are protected by the Federal Deposit Insurance Corporation. Up to $250,000 of a customer's deposits can be insured by the Federal Deposit Insurance Corporation.

The announcement of Celsius's insolvency isn't hurting the bigger market. As of 1:00 p.m., there was a 3.6% increase in the price of Bitcoins. Time in Hong Kong.