DeFi lender Celsius has hired law firm Akin Gump Strauss Hauer & Feld to help keep the company afloat, sources told The Wall Street Journal on Tuesday. The company halted trading and withdrawals earlier this week amid what it called “extreme market conditions.”
The company is discussing multiple options with attorneys, ranging from seeking more investor capital to undergoing a complete financial restructuring. The company promises customers up to 18.63% yield on cryptocurrencies and claims to have approximately 1.7 million users. Though the company markets itself as similar to a bank, it operates more like a hedge fund, holding upwards of $11 billion in assets in May. And Celsius was incredibly successful at consistently producing those returns as cryptocurrencies boomed in 2020 and 2021, leading to an over $10 billion valuation in November.
The company has not only suffered from the cryptocurrency bear market hitting all blockchain projects; it’s also dragged the value of ether down with it. The company held an undisclosed amount of UST, and so was exposed to the Terra collapse. But the bigger hit came when a crypto derivative — Lido Staked ether, or stETH — lost its unofficial one-to-one peg with ETH. The company was relying on the 1-1 ratio for liability purposes while staking ether on the Ethereum Beacon Chain. Ether stored on the Ethereum Beacon Chain cannot be unstaked, so when stETH lost its unofficial peg, Celsius lost considerable liquid assets. When Celsius halted trading, the value of ether slid.
Celsius and Akin Gump did not respond to Protocol's requests for comment.