Seeking advice on possible legal solutions of the crisis Celsius said had been caused by “extreme market conditions,” the company hired restructuring attorneys from Akin Gump Strauss Hauer & Feld, an international law firm and one of the largest lobbying agencies in the U.S., the Wall Street Journal reported.
After suspending all withdrawals, swap, and transfers between accounts on Monday, the platform has faced accusations that it had repeated the mistakes of Terra and appropriated users’ funds. On-chain analysts rushed to explain the situation, with some pointing to unsustainable yield strategies Celsius had resorted to in order to maintain liquidity, including on Anchor, part of the Terra ecosystem, days before the depegging of UST.
At the same time, Celsius reportedly had a large stake in stETH, a derivative token created to incentivize ETH holders to stake their coins in the runup to the Merge. With stETH, users could have their actual ETH staked and still have liquid stETH to play with. Once ETH is staked for stETH, though, the process cannot be reversed until the Merge is complete, and the date of Ethereum’s mainnet transition remains unknown.
Meanwhile, Celsius reportedly locked their customers’ ETH into stETH while still allowing daily withdrawals, according to Bitcoin Magazine. As the stETH began losing its peg to ETH, the protocol realized there was not enough liquidity for it to exit these positions without considerable losses.
Whatever proves to have been the final trigger for the suspension of withdrawals, Celsius faces an uphill battle regaining the community’s trust. Nexo, another crypto lending giant, was quick to make a formal offer to acquire Celsius’s remaining qualifying assets.
The company has until June 20 to respond.