Crypto lender Celsius is telling state regulators that it is “inevitably” filing for bankruptcy, the source said.

Celsius was sued Thursday by former investment manager Jason Stone as pressure continues to mount on the firm amid falling cryptocurrency prices. Stone claimed, among other things, that Celsius CEO Alex Mashinsky (above) “was able to get rich considerably”.

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Cryptocurrency company Celsius is in the process of filing for Chapter 11 bankruptcy, according to a source familiar with these discussions.

According to the source, as of Wednesday evening, the company’s lawyers were notifying the regulators of individual US states, who asked not to be named because the proceedings were of a private nature. Celsius plans to file the paperwork “soon,” the person said.

A month ago, a Hoboken, New Jersey-based company made headlines after it froze customer accounts. accusation “extreme market conditions”.

The news marks the latest high-profile crypto bankruptcy as prices plummet.

Voyager filed filed for Chapter 11 bankruptcy protection last week after suffering losses due to exposure to the now-defunct hedge fund Three Arrows Capital. This week, a New York bankruptcy court judge froze the remaining assets of Three Arrows Capital. The fund is currently in the process of liquidation.

“Unfortunately, this was to be expected. It was expected. However, this does not stop our investigations. We will continue to investigate the company and work to protect its customers, even if it is insolvent.” —Joseph Rotunda, Texas Law Enforcement Director The Securities Board declared Celsius bankrupt.

Celsius did not immediately respond to a CNBC request for comment.

The company has been one of the biggest players in the crypto lending space with over $8 billion in loans to customers and nearly $12 billion in assets under management as of May. Celsius said it had 1.7 million customers as of June and competed with its interest-bearing accounts and returns up to 17%.

The firm lent clients’ cryptocurrencies to counterparties willing to pay sky-high interest rates. Celsius will then share some of that revenue with users. But the structure collapsed amid liquidity crunch in branch.

The company was sued last week by a former investment manager who claimed Celsius failed to hedge risks artificially inflated the price of its digital coin and engaged in activities that amounted to fraud.

Regulators in six states have already launched an investigation into Celsius. Vermont was the latest to do so earlier Wednesday. The state’s Department of Financial Regulation said that Celsius “used client assets for a variety of risky and illiquid investments, trading and lending.”

“Celsius clients were not receiving critical information about their financial condition, investment activity, risk factors, and ability to redeem their bonds to depositors and other creditors,” the Vermont regulator said in a statement. “The company’s assets and investments are likely insufficient to cover its outstanding liabilities.”