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Celsius Network and affiliates file Chapter 11 bankruptcy in the Southern District of New York after freezing all customer withdrawals on June 12, 2022, trapping approximately $4.7 billion in customer funds and exposing the catastrophic regulatory void in cryptocurrency lending. Celsius operated like a bank—promising returns up to 17% on crypto deposits—but faced none of the capital requirements, reserve standards, or consumer protections that govern actual banks. The collapse reveals how the lack of regulatory classification for crypto assets allowed firms to 'engage in runaway risk-taking, exuberant opportunism, and outright fraud,' with bankruptcy courts forced to serve as 'proxy overseers' for an industry that successfully evaded SEC, CFTC, and Federal Reserve oversight. A bankruptcy court ruling finds that customer deposits in Celsius's 'Earn' program became company property upon deposit, leaving retail customers with unsecured creditor status and massive losses. The FTC in July 2023 reaches a settlement permanently banning Celsius from handling consumer assets and charging three former executives with 'tricking consumers into transferring cryptocurrency onto the platform by falsely promising that deposits would be safe and always available'—what the FTC calls 'an old-fashioned swindle.' The Celsius collapse, along with Voyager Digital's July 5, 2022 bankruptcy filing, resulted from exposure to failed crypto hedge fund Three Arrows Capital, revealing systemic interconnection risks that no regulator monitored. The cascading failures demonstrate how regulatory arbitrage enabled crypto platforms to operate as shadow banks without prudential oversight.