Crypto lending platform Celsius has confirmed it’s filed for a Chapter 11 bankruptcy and has begun financial restructuring.

This follows the news that the embattled, crypto-contagion-affected company had officially paid off all of its DeFi debts to Maker, Compound, and Aave this week, reducing its debt from US$820 million to zero.

While any statement involving the word “bankruptcy” hardly sounds like good news, some in the crypto community are treating it thus. A Chapter 11 apparently means unsecured creditors will have a higher chance of repayment than the total liquidation the Chapter 7 alternative would bring.

According to a Celsius explanation, Chapter 11 “is a process in the US through which companies restructure their financial obligations while operations continue.”

“Many well-known companies have successfully reorganized under Chapter 11 and emerged stronger, including American Airlines, Delta, General Motors, Hertz, and Marvel, to name a few,” wrote the crypto platform.

Through the process, Celsius says it intends to “maximize value for all stakeholders” and position itself to emerge as a stronger company.

Cool – so does this mean users with their funds locked up might have a chance of seeing their funds back any time soon? Yeahnah… Celsius’s withdrawals, swap and transfer functions will remain paused until further notice, and rewards will stop accruing from the date of the bankruptcy filing, too.

For what it’s worth, though, Celsius said it aims to use its US$167 million in cash-on-hand to continue “certain operations” during its restructuring and claims it intends to eventually “restore activity across the platform” and “return value to customers”.

“This is the right decision for our community and company,” said Celsius CEO Alex Mashinsky, also describing it as a “defining moment” for the company. He’s got that right.


Is Celsius ‘deeply insolvent’?

Meanwhile, the Department of Financial Regulation of the US State of Vermont is one of the state regulators investigating Celsius, and has alleged the company will struggle to meet its repayment obligations.

“The Department believes Celsius is deeply insolvent and lacks the assets and liquidity to honor its obligations to account holders and other creditors,” wrote the state regulator in a damning statement.


Voyager token VGX has been pumping… WTF?

Celsius follows other struggling crypto companies down the bankruptcy rabbit hole, including hedge fund Three Arrows Capital (3AC) and brokerage Voyager.

The latter also recently filed for a Chapter 11 bankruptcy but interestingly, its governance token VGX has been pumping over the past 24 hours or so.

According to CoinGecko data, it’s currently up 23% and trading a bit above US$0.55, although earlier it surged about 178% to hit a daily high of U$S0.891.

So what’s going on there? As reported by Cointelegraph, the Twitter hashtag #PumpVGXJuly18 seems to have emerged over the past 24 hours, along with a 2,160+ member Telegram group called the “Voyager Community Recovery Channel”.

And according to the report, a little-known crypto venture firm called MetaFormLabs, appears to have initiated the VGX-pumping move on July 9 on Twitter, aiming for a token price target of US$5…

… along with a “rescue package” it claims will be about US$135m…

Celsius’s CEL token recently had similar price action with reportedly coordinated efforts from some traders to enact a “short squeeze” on the token.

If this VGX pumpage goes anything like that, however, it could well be short lived. Speculative, opportunist buyer beware.