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ARTICLE · 19 JANUARY 2023

The Celsius Bankruptcy And Application Of The Bad Debt Rules

Miller Thomson
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Many cryptocurrency lenders have declared bankruptcy. These loss events are indicators of the significant losses the cryptocurrency market has experienced this year.

CanadaTechnology
Anish Kamboj
Anish Kamboj
Andrew Rodrigues
Andrew Rodrigues
Raffaella Garofalo
Raffaella Garofalo
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Many cryptocurrency lenders have declared bankruptcy. These loss events are indicators of the significant losses the cryptocurrency market has experienced this year.

For investors who have suffered, an important consideration is how to capitalize on these losses. Accordingly, this article will analyze the recent Celsius Network ("Celsius") bankruptcy and the tax strategy of writing off bad debt.

The Celsius Bankruptcy

On July 13, 2022, Celsius filed for Chapter 11 bankruptcy protection.1 From a lender once purporting to have $25 billion in assets under management, the company only held $167 million in "cash on hand" at the time of their bankruptcy filing.2

Celsius was intended to operate as a traditional bank with the promise of significant returns – nearly 20% annual percentage yield. As an investor, a user could deposit cryptocurrency into Celsius.3 The lender would then take these deposits and loan them out to borrowers.4 The user would then receive a

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