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Crypto lender Celsius Network files for bankruptcy after cash crunch

lender Celsius Network filed for Chapter 11 bankruptcy, the latest casualty of a $2 trillion crash that has wiped out some of the industry’s bigg­est names and exposed hun­dreds of thousands of individual investors to steep losses.

Celsius, which has more than 100,000 creditors, said it took the step to stabilise its business and work out a restructuring for all stake­holders.

The filing was done in the Southern District of New York.

The company, one of the largest lenders, had amassed more than $20 billion in assets by offering interest rates as high as 18 per cent to depositors before it halted all withdrawals in June amid a panic run by clients.

Going belly up

Celsius has seen a change of -85.81% YTD.

It is classified under CoinDesk’s Digital Asset Classification Standard

Celsius Market Cap

$430.51M

Current price

$0.621448

24H chg in price (in %)

-14.14%

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Locked out of the Vauld: How the cryptocurrency exchange’s vaulting success unravelled

  • Vauld, a Singapore-domiciled crypto lending platform, suspended withdrawal and halted all operations on 4th July, firing 30% of their staff.
  • CFO Jatin Malcazar resigned from Vauld on Monday.
  • Vauld said it had net liabilities of about $70 million on its balance sheet.
  • Vauld investors are hoping London-based Nexo’s acquisition of Vauld would come through.


The year 2022 started well for Vauld, a Singapore-domiciled cryptocurrency exchange. It had raised $27 million in Series A seed funding the year before. Its founders had made it to the Forbes Asia Finance and Venture Capital 30 under 30 list. And then everything unravelled, rapidly.

In the last week of June, it laid off 30% of its staff. On July 4, Vauld froze all withdrawals. The company’s CFO Jatin Malcazar left the Asian lender abruptly on Monday, barely a month and a half after he had joined the group. In a letter issued to the shareholders on Monday, Vauld confirmed the company’s financial liabilities.

“On a group level, Vauld has assets worth $330 million and liabilities worth $400 million at this time. We have always strived to be a company that gives you the most value. We are exploring multiple ways forward to deliver on that promise. Our top priority is to complete the due diligence process with Nexo,” said Vauld.

Nexo is a London-based platform for providing instant crypto loans, where you can also buy, earn interest or swap cryptos. Nexo has offered to
acquire 100% of Vauld, signing an indicative term sheet a week ago. The deal, however, has not been finalised yet.

Vauld was founded in 2018 and sells and borrows crypto with no brokerage fees. Its backers include PayPal founder Peter Thiel, Pantera Capital, Coinbase Ventures, CMT Digital, Gumi Cryptos, Robert Leshner and Cadenza Capital. The returns promised were based on making SIPs in crypto, with an interest of 9-12 percent.

Vauld’s freezing of withdrawals came out of the blue. Just three weeks earlier, Darshan Bathija, co-founder of Vauld, had sent a message to his users, affirming all was well. So, what then went wrong? Why did Vauld suddenly halt withdrawals?

A collateral damage of crypto winter?

The beginning of 2022 marked the start of a biting crypto winter, with its market value falling to less than $1 trillion since January 2021. The first blow was the crash of stablecoin Terra Luna, which wiped $500 million off the market. In June 2022, crypto lending platforms like Voyager and Celsius also collapsed.

A tweet put out by Vauld explained that the company faced a withdrawal of over $200 million since June 12, 2022, triggered by the collapse of Terraform Lab’s UST Stablecoin, Celsius Network pausing withdrawals, and crypto hedge fundhedge fund 3AC defaulting on loans.

When asked the reason behind the collapse, Bathija, in a Telegram group said, “We are facing challenges despite our best efforts. This is due to a combination of circumstances such as the volatile market conditions, the financial difficulties of our key business partners inevitably affecting us, and the current market climate.”

With Vauld’s liabilities at $70 million, Vauld team is optimistic that the Nexo deal will come through.

“We have seen concerns around what our alternative options are in case the Nexo acquisition does not happen, we want to address that head on”, said Bathija in a note issued by Vauld on Monday.

Vauld claims to have customers from 190 countries with the average customer depositing $20,000. The majority of users are Indians, making up over 20 percent of its assets under management. In Vauld’s telegram, users have been listing their concerns, talking about the extent of money that will be lost if the acquisition with Nexo does not come through.

Customers have millions stuck

The problem is compounded by the fact that the customers’ money that is stuck is in two forms- crypto and fiat (INR).

A user shared a screenshot of their wallet, claiming to have Shiba Inu ( a decentralised cryptocurrency like dogecoin) worth $1000 million stuck in Vauld.

Pritish Kumawat, co-founder and CEO at XBT Labs Pvt Ltd said, however, has his money in fiat form.

“We are talking about money worth $100 million in question here. My firm alone has ₹2.2 crore stuck in INR balance. We trusted Vauld but we could see trouble brewing for over a month now,” Kumawat said.

Kumawat added that while other mega crypto exchanges of India were under maintenance to efficiently implement India’s new crypto tax rules, Vauld had done no such thing. Another investor, an advisory financial firm in the USA called Prosperity Fund, says it is elated that it did not invest a large amount in Vauld.

“Even though our firm puts capital in assets like crypto to analyse its legitimacy for our users, we were glad that we only put half a million with Vauld. We backed it because of its highly engaging customer service and good user experience,” Prosperity Fund Director Ariel Fisherman told Business Insider.

“However, we are positive the Nexo deal will come through. When Nexo agreed to bail out Celsius with over a billion liabilities, $70 million should be a small amount for them,” Fisherman added.


Will customers get their money back?

Since the communication put out by Vauld on Monday, there is widespread belief that the Nexo deal would come through, as the liabilities were seen to be manageable.

Bathija said, “While we are very optimistic about joining forces with Nexo, on the off chance that we can’t make it work, our plan will include a combination of raising more venture capital, exploring alternatives for acquisition, wait for deployed capital to be returned, convert debt into equity or issue our own token.”

Another way users might regain their money is by taking a “haircut” on their deposits.

“Seems like users will have to take a haircut on their deposits or be made whole through other means like tokens or equity swap similar to what Voyager is planning”, added crypto trader Saleem.

It is a concern for firms like XBT Labs who have their money stuck in the form of INR balance. “We, as Indian users of Vauld, would want Vauld to return the INR balance as it is, without converting it into crypto. Voyager is returning USD to their customers. The same should happen here,” said Kumawat.

Vauld is registered in Singapore, but has an Indian unit, Flipvolt Technologies, that is registered in Coimbatore and is owned by Bathija and his wife Kirthi Bathija.

Some users still trust Vauld to come through this crisis, while others have threatened to sue the company if the Nexo deal gets cancelled. Either way, for Vauld investors, it’s now a game of wait and watch.




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Cryptocurrency meltdown: Brutal Week Ends With a Trading Halt and a Bailout

The meltdown in cryptocurrency markets deepened this week, as major players contended with liquidations, withdrawal freezes, trading halts — and, at least in one case, a bailout.

The meltdown in cryptocurrency markets deepened this week, as major players contended with liquidations, withdrawal freezes, trading halts — and, at least in one case, a bailout.    

Crypto broker Voyager Digital Ltd. on Friday announced a suspension of trading, deposits and withdrawals, while BlockFi, a major digital-asset lender, won the backing of exchange FTX US with the potential to be acquired. Both companies were upended by the woes of Three Arrows Capital Ltd., the beleaguered crypto hedge fund that was ordered for liquidation by a British Virgin Islands court this week and filed for Chapter 15 bankruptcy protection in New York. 

Also read: Looking for a smartphone? To check mobile finder click here.

Meanwhile, crypto markets slumped, adding to a decline that has wiped away some $2 trillion of market value.

“I had begun to think that dominoes had stopped falling in mid-June,” said Aaron Brown, a crypto investor and Bloomberg Opinion contributor. “I suspect by Tuesday morning there will be more bad news, although I make no specific predictions.” 

Much of the industry’s recent liquidity issues stem from the troubles at Three Arrows, which suffered from large losses after making big bullish bets on everything from Bitcoin to Luna, part of the Terra ecosystem whose implosion in May sparked a major market spasm. Founded in 2012 by Zhu Su and Kyle Davies, former Credit Suisse traders, the fund has become emblematic of the industry’s excesses during last year’s bull run, when it built up leverage that proved destructive when the market turned.  

The fuller extent of their impact on the industry is starting to emerge: Blockchain.com and Deribit, a crypto derivatives exchange, this week confirmed that they are among creditors that sought for the liquidation of Three Arrows. A spokesperson with Blockchain.com said it is also cooperating with ongoing investigations into activities by Three Arrows, which has been reprimanded by Singapore’s central bank over false information. 

“Crypto is a nascent industry, but intense competition developed amongst service providers vying for the business of a small set of entirely new counterparties,” said Alex Felix, Managing Partner at CoinFund. 

Kyle Samani, co-founder and managing partner at Multicoin Capital, said there is a need for appropriate regulations and transparency, and that an industry coalition should come together to protect retail customers.

Voyager’s chief executive officer Stephen Ehrlich said it needs additional time to explore strategic alternatives, something that Celsius Network, which has also halted withdrawals, has also been pursuing. Sam Bankman-Fried, who has acted as a lender of last resort for the industry, earlier turned down a bailout request by Celsius, according to a person familiar with the matter.

“This was a tremendously difficult decision, but we believe it is the right one given current market conditions,” said Ehrlich in a statement. 

Voyager plunged as much as 43% in US trading following Friday’s news, making it one of the worst-performing crypto stocks. Based in New York, Voyager offers crypto trading, staking — a way of earning rewards for holding certain cryptocurrencies — and yield products.

Last month, Voyager issued a notice of default to Three Arrows on a loan worth roughly $675 million. It’s actively pursuing recovery from the crypto hedge fund, including through the court-ordered liquidation process in the British Virgin Islands. It has received a credit line from Alameda Research, Bankman-Fried’s trading firm.

Bankman-Fried, for his part, is already eyeing more acquisitions as he solidifies his outsize influence in the industry. The battled crypto-mining industry might be his next target, he said. 




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Crypto’s brutal week ends with a trading halt and a bailout

The meltdown in cryptocurrency markets deepened this week, as major players contended with liquidations, withdrawal freezes, trading halts — and, at least in one case, a bailout.
Crypto broker Voyager Digital Ltd on Friday announced a suspension of trading, deposits and withdrawals, while BlockFi, a major digital-asset lender, won the backing of exchange FTX US with the potential to be acquired. Both companies were upended by the woes of Three Arrows Capital Ltd, the beleaguered crypto hedge fund that was ordered for liquidation by a British Virgin Islands court this week and filed for Chapter 15 bankruptcy protection in New York.
Meanwhile, crypto markets slumped, adding to a decline that has wiped away some $2 trillion of market value and leaving market participants uneasy heading into the long Fourth of July weekend.
“I had begun to think that dominoes had stopped falling in mid-June,” said Aaron Brown, a crypto investor and Bloomberg Opinion contributor. “I suspect by Tuesday morning there will be more bad news, although I make no specific predictions.”
Much of the industry’s recent liquidity issues stem from the troubles at Three Arrows, which suffered from large losses after making big bullish bets on everything from Bitcoin to Luna, part of the Terra ecosystem whose implosion in May sparked a major market spasm. Founded in 2012 by Zhu Su and Kyle Davies, former Credit Suisse traders, Three Arrows has become emblematic of the industry’s excesses during last year’s bull run, when it built up leverage that proved destructive when the market turned.
The fuller extent of their impact on the industry is starting to emerge: Blockchain.com and Deribit, a crypto derivatives exchange, this week confirmed that they are among creditors that sought for the liquidation of Three Arrows. A spokesperson with Blockchain.com said it is also cooperating with ongoing investigations into activities by Three Arrows, which has been reprimanded by Singapore’s central bank over false information.
“Crypto is a nascent industry, but intense competition developed amongst service providers vying for the business of a small set of entirely new counterparties,” said Alex Felix, Managing Partner at CoinFund.
Kyle Samani, co-founder and managing partner at Multicoin Capital, said there is a need for appropriate regulations and transparency, and that an industry coalition should come together to protect retail customers.
Voyager’s chief executive officer Stephen Ehrlich said it needs additional time to explore strategic alternatives, something that Celsius Network, which has also halted withdrawals, has also been pursuing. Sam Bankman-Fried, who has acted as a lender of last resort for the industry, earlier turned down a bailout request by Celsius, according to a person familiar with the matter.
“This was a tremendously difficult decision, but we believe it is the right one given current market conditions,” said Ehrlich in a statement.
Voyager plunged as much as 43% in US trading following Friday’s news, making it one of the worst-performing crypto stocks. Based in New York, Voyager offers crypto trading, staking — a way of earning rewards for holding certain cryptocurrencies — and yield products.
Last month, Voyager issued a notice of default to Three Arrows on a loan worth roughly $675 million. It’s actively pursuing recovery from the crypto hedge fund, including through the court-ordered liquidation process in the British Virgin Islands. It has received a credit line from Alameda Research, Bankman-Fried’s trading firm.
Bankman-Fried, for his part, is already eyeing more acquisitions as he solidifies his outsize influence in the industry. The battled crypto-mining industry might be his next target, he said.




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Bitcoin and crypto platforms are in trouble. What’s behind the collapse? – National

The plummeting value of Bitcoin and turmoil across major cryptocurrency platforms has many investors fretting about their digital wallets and leaders in the space warning about a “crypto winter.”

So what’s happening, and what does it mean for your portfolio? Here’s what you need to know.

What’s happening to Bitcoin?

Bitcoin is continuing a downward spiral that has marked much of 2022 for the popular cryptocurrency.

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The digital currency continued to sink Tuesday following a 16-per cent drop on Monday that sent its value as low as US$22,400. Bitcoin has lost more than two-thirds of its value compared to all-time highs in November of last year.

Bitcoin is not the only crypto asset facing a downturn.

Ethereum, another widely-followed cryptocurrency, was down roughly 17 per cent on Monday. The crypto market as a whole dropped below a value of US$1 trillion this week.

Investors have been selling riskier assets such as digital currencies and technology stocks as the Federal Reserve raises interest rates to combat high inflation.

Monday marked the start of a bear market on Wall Street as the S&P 500 fell 20 per cent below a previous high point in January.

Read more:

Wall Street enters bear market as rate hike, recession fears send stocks lower

Alex Tapscott, managing director of the digital asset group at Ninepoint Partners, tells Global News that cryptocurrencies have suffered through the same “broad-based selloff” in 2022 that’s hit the value of higher-risk assets including tech stocks such as Netflix and Meta.

He says that trend has “accelerated” recently as investors look to get riskier assets off their portfolios.

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“Investors are looking to de-risk all over the board and Bitcoin and crypto assets are getting washed up along with it,” he says.

What’s happening to crypto platforms?

Bitcoin’s latest falls are also being tied in part to alarming moves from some major crypto exchanges and lending platforms who have announced plans this week to stem operations or cut jobs.

On Sunday, the cryptocurrency lending platform Celsius Network announced that it was pausing all withdrawals and transfers between accounts in order to “honor, over time, withdrawal obligations.”

Celsius, with roughly 1.7 million customers and more than US$10 billion in assets, gave no indication in its announcement when it would allow users to access their funds.


Click to play video: 'What you need to know before investing in cryptocurrency'



What you need to know before investing in cryptocurrency


What you need to know before investing in cryptocurrency – Nov 4, 2021

Caisse de dépôt et placement du Québec, the province’s pension fund, is among Celsius’ backers.

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“That has created a crisis of confidence, I think, in many other companies in the sector and people are now wondering just how at risk their investments might be,” Tapscott says.

Meanwhile on Tuesday, crypto exchange Coinbase announced it was cutting 1,100 jobs, or 18 per cent of its workforce. It joins companies including BlockFi and Crypto.com in slashing hundreds of jobs amid the collapse.

Coinbase CEO Brian Armstrong said in a blog post announcing the decision that the platform grew too quickly as it tried to capitalize on the crypto boom last year and would need to cut costs as it prepares for an economic downturn.

“We appear to be entering a recession after a 10+ year economic boom. A recession could lead to another crypto winter, and could last for an extended period,” Armstrong wrote.

What’s a ‘crypto winter’?

The “crypto winter” that Armstrong reference in his post typically refers to a prolonged period or months or years in the cryptocurrency sphere when digital assets are declining in value with very little interest in the space as a whole.

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“It is what it sounds like. It’s a winter, it’s cold, it’s cool. Investors don’t want to be in it. More sellers than buyers,” says Genevieve Roche-Decter, CEO of Grit Capital.


Click to play video: 'Crypto market value falls below US$1 trillion as bitcoin hits 18-month low'



Crypto market value falls below US$1 trillion as bitcoin hits 18-month low


Crypto market value falls below US$1 trillion as bitcoin hits 18-month low

This could be a period when so-called alt-coins that popped up during the crypto mania of the past few years could plummet and lose all value, she says, similar to the dot-com bubble of the late 1990s.

Read more:

Shouldn’t stablecoins be stable? What’s behind TerraUSD’s collapse

Tapscott is less convinced that winter has come for cryptocurrencies.

While there have been previous busts and declines across the crypto world, he notes that recent years have seen institutional investors take on a more vested interest in digital assets.

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Payment processors such as Paypal, Visa and Mastercard have gotten into crypto and many exchange platforms still have a sizeable access to funding that they wouldn’t have had in earlier downturns.

“There’s a lot of funding. It’s quite sophisticated, it’s much more widely held, there’s far more innovation and therefore utility,” he says.

“And I think as a result we’re going to see the winter, such as it is, be a little less cold and a little less long than anything we’ve seen in the past. I think if anything, it will recover much faster this time.”

What should you do about your portfolio?

For many investors who got into the crypto space amid the recent hype of Super Bowl commercials and Reddit threads, this will be the first time seeing the value of their digital assets dwindle.

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Roche-Decter says that owning cryptocurrencies is “not for the faint of heart” and that it could take years before assets such as Bitcoin return to their previous highs, if they ever do.

Bitcoin and other cryptocurrencies have seen great gains as well as great falls, and anyone counting on big payoffs in the space will likely have to take on a long investment horizon, she says.


Click to play video: 'Money Matters with the Baun Investment Group at Wellington-Altus Private Wealth'



Money Matters with the Baun Investment Group at Wellington-Altus Private Wealth


Money Matters with the Baun Investment Group at Wellington-Altus Private Wealth

When it comes to making money with your portfolio, Roche-Decter says many young investors might be discouraged to hear that volatile assets such as crypto are not usually the best path forward.

“Boring is actually sexy. The way to make money long term is to be in just basic companies that generate revenue in up and down markets. And unfortunately, that’s not what that generation wants to hear,” she says.

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For investors wanting to ride the crypto roller coaster, Roche-Decter recommends a more limited exposure. An overall portfolio could have 80 per cent safer assets and 20 per cent to have fun with in more speculative ventures, she suggests.

“I don’t support all of those things, but you have to keep some of it entertaining and keep yourself in the game. The rest of it — sleep at night,” she says.

— with files from Global News’s Anne Gaviola, The Associated Press, Reuters

© 2022 Global News, a division of Corus Entertainment Inc.




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Why States Will Continue To Regulate Bitcoin Use

Regulators continue to debate how to define cryptocurrencies, such as bitcoin, and whether they are securities, commodities or properties, etc., which is critical for how regulators choose to enforce those regulations.

At the recent National Association of Attorneys General Consumer Protection Conference in November 2021, Hester Peirce, commissioner of the U.S. Securities and Exchange Commission (SEC), commented on the issue, saying “the view we are taking these days is that pretty much everything is a security.”


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