The bankruptcy of financially distressed crypto lending platform Celsius is probably inevitable. This view was expressed by Adam Levitin, a law professor at Georgetown University.

On June 13, Celsius suspended withdrawals, clearing and transfers between accounts “due to extreme market conditions”. But analysts have suggested that the real reason for what happened was a “liquidity crisis” as the company was unable to pay customers.

Earlier, analysts noted that the Celsius team has strengthened its debt position in three key areas. In the Maker DAO, the platform increased the amount of collateral, raising the cash clearing price to $14,000 per wBTC. Celsius also increased the ETH collateral of stETH tokenized assets on the Aave protocol and paid off 2.4 million USDC of debt.

Levtin noted that the Celsius administration decided to bet on a “resurrection gamble”. The lawyer called it standard practice for companies that go bankrupt.

For Celsius, liquidating the Maker DAO loan was more expensive than increasing the collateral, according to Levitin.

He believes that sooner or later, the platform management should decide on the sale of liquid assets to repay users’ funds. Bankruptcy, which the lawyer says is almost inevitable, will streamline this process and subsequent litigation.

Levitin also believes that nearly all Celsius customers will act as unsecured creditors of the platform. This means that payments to them will be made from the funds remaining after the secured loans have been repaid and all administrative costs have been paid.

Recall, May 15, The Wall Street Journal reported that Celsius has hired lawyers from Akin Gump Strauss Hauer & Feld for a possible financial restructuring.

Journalists emphasized that the initial purpose of the platform was to raise capital from investors.

According to The Block, the company turned to financial conglomerate Citigroup to address this issue.