Bankrupt Cryptocurrency Lender Celsius Submits its Bankruptcy Plan for Creditor Vote

Crypto-asset lender Celsius Network on Monday (August 14, 2023) received a US bankruptcy judge’s permission to obtain creditor approval for its ongoing bankruptcy plan, which is presenting a proposal to exit Chapter 11 as a another business entity that would be owned by the firm’s creditors.

As first reported by Reuters, Judge Martin Glenn has now officially signed off on Celsius’ disclosure statement as well as its solicitation materials at a US Bankruptcy Court hearing held in Manhattan, noting that Celsius provided creditors adequate details to vote on the suggested restructuring process.

A few of the creditors do not approve of the latest plan, however, the official Committee that’s appointed to represent junior creditors supports the plan and should be suggesting that Celsius clients vote in favor.

New Jersey-headquartered Celsius had filed for Chapter 11 protection back in July of last year, one of a number of crypto-focused lenders to go bankrupt after the fast growth of the sector during the COVID-19 crisis.

Celsius reportedly claimed around 600,000 clients who collectively held approximately $4.4B in interest-yielding Celsius accounts when it decided to file for bankruptcy (as per official court documents).

It’s worth noting that Celsius’ bankruptcy plan might return certain cryptocurrency deposits to retail clients and give back control of the outstanding business lines – such as Bitcoin mining and staking – to the Fahrenheit Group, an entity which reportedly includes blockchain-focused VC company Arrington Capital.

Celsius believes that the majority of clients, who maintained interest-yielding Earn accounts, should get about a 67% recovery, but the return of liquid digital assets such as Bitcoin (BTC) and Ethereum (ETH), equity shares in the new firm, as well as proceeds of post-bankruptcy litigation against Celsius founder Alex Mashinsky and others.

Clients should typically get a higher recovery on other, non-interest-bearing accounts, according to the report from Reuters.

Fahrenheit may acquire a minority stake in the new business entity for around $50 million and could publicly list the new firm’s stock on Nasdaq.

This move should enable Celsius clients to sell off their equity shares which they should be entitled to, as part of their bankruptcy recovery (as indicated in court documents).

The reorganized firm should aim to pursue litigation against Mashinsky, who currently faces major US criminal charges and a New York civil lawsuit for “misleading” clients as well as artificially inflating the value of his firm’s digital token.

Mashinsky has pleaded not guilty to all of these charges.

Celsius creditors now have a September 20, 2023 deadline date in order to cast votes regarding the said proposal, meanwhile, Celsius is planning to obtain official court approval of its restructuring plan on October 2 of this year (as stated in the court documents).

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