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Bankrupt Crypto Lender Celsius Turns To Customer Vote Following Court Approval

Bitcoinist

Bitcoin News / Bitcoinist 108 Views

Celsius Network, the bankrupt cryptocurrency lender, has received court approval for its restructuring plan as it works to emerge from bankruptcy. The plan, which allows Celsius to restructure its debts and continue operating, received a United States bankruptcy judge’s permission to commence creditor votes.

Celsius Receives Blessing From The Court

Celsius Network, a crypto lending platform, filed for bankruptcy in July 2022 after the downturn in crypto markets caused a liquidity crisis. The company had around 600,000 clients during the height of its operations, and those clients had approximately $4.4 billion in interest-bearing accounts.

Following the bankruptcy, Celsius had initially made known its plan to repay its creditors, saying it would distribute at least $2 billion of cryptocurrency to its creditors.

With Judge Martin Glenn of a Manhattan Bankruptcy Court now signing off on Celsius’s disclosure statement, creditors, including customers, suppliers, and investors, will have the opportunity to vote to approve a reorganization that pays them back a fraction of their holdings.

Celsius (CEL) price chart from Tradingview.com

Following The Restructuring Plan

Celsius’s plan to restructure and transition into a new company following its bankruptcy provides a glimmer of hope for customers and investors. As part of the restructuring process, the company will transition to a new crypto company called “NewCo,” a NASDAQ-listed company managed by Fahrenheit Group and owned by customers. The new company will focus mainly on the remnants of Celsius’ bitcoin mining and staking operations and will receive a minority stake of $50 million from Fahrenheit.

Celsius hopes to use the new company to source a repayment plan of 67% for customers who had interest-bearing Earn accounts. Creditors, including customers and investors, would receive repayments in liquid crypto assets, a portion of the new company’s equity, and proceeds of post-bankruptcy litigation, which the new company will pursue against founder Alex Mashinsky.

For the many customers and investors caught in the crossfire of Celsius’ downfall, the restructuring plan offers hope amid the uncertainty. While some creditors oppose the plan, it is anticipated that most customers will vote in favor of it. 

Customers who do not participate by September 20 have to opt out of the settlement. If the majority of customers agree on a consensus, it will go before the court for approval in October.

Related Reading: This Crypto Founder Believes Another Bitcoin Bull Run Is Close, Here’s Why

Celsius was one of a few crypto lenders who went bankrupt as the crypto market entered a prolonged bear period. While the crypto market was booming, the company could pay high-interest rates to customers by lending out their deposits to hedge funds and other institutional borrowers. 

However, when crypto prices crashed, many borrowers like Three Arrows Capital defaulted in payments, forcing Celsius to go bankrupt. Voyager Digital and BlockFi are other cryptocurrency lenders that share the same fate.

Celsius also previously announced in court filings that it plans to shut down its mobile app within 90 days as it looks to cease operations in its current form. 


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