Celsius Lawyers Up Following Account Freeze, Liquidity Crunch

Cryptocurrency lender Celsius has hired a top US law firm to help navigate its financial headaches following a momentous decision to freeze users’ accounts.

Due to its ongoing liquidity crunch, Celsius has tapped Washington, D.C.-based unit Akin Gump Strauss Hauer & Feld to assist seeking out potential financing options from investors, the Wall Street Journal reported Tuesday.

Financial restructuring of Celsius could also be on the cards, according to the report that cited people familiar with the matter. Akin is an international law firm and one of the largest lobbying firms in the US by total revenue.

Celsius, which as of May boasted $11.8 billion in digital assets under management, made the decision Sunday to pause withdrawals, swaps and transfers between user accounts, attributing “extreme market conditions” for the move.

Early rumors of its financial trouble, alongside tepid crypto markets, had triggered the lender’s native token CEL to collapse 90% since April, from $3.15 to $0.40 when accounts were locked.

Celsius earns revenue by rehypothecating customer deposited funds. As demand for redemptions increases during a market downturn and exceeds its liquid reserves on hand, the lender is forced to unwind its positions. As such, Celsius has faced a liquidity crisis as it fails to meet demand from customers.

The Hoboken-headquartered company has said its decision to pause withdrawals was undertaken to “stabilize liquidity and operations” – a move that has effectively shaken confidence in lenders among institutional and retail investors alike.

Prior to its decision to freeze accounts, Celsius promised its users annual percentage yields of up to 18.6% on crypto deposits, according to its website.

Blockworks attempted to contact Celsius and Akin but did not receive a reply by press time.

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