Creditors to Vote on Celsius’ Bankruptcy Exit Plan Following Judicial Authorization

Jimmy Aki
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Celsius Network has been granted authorization by a United States judge to seek creditor consent for its active bankruptcy strategy. This strategy entails the sale of assets to the Fahrenheit consortium.

Sale Could See Clints Recover 67% of Holdings

In a pivotal moment for Celsius Corporation, creditors are set to cast their votes on a bankruptcy-escape plan after receiving judicial approval.

According to the document, New York Bankruptcy Judge Martin Glenn has approved the Disclosure Statement submitted on August 17, 2023.

The document noted that the approval confirms that the provided information in the statement is sufficient for Claim Holders who have the right to vote on the plan. They can now decide whether to vote in favor of or against the Plan under Section 1125 of the Bankruptcy Code.

Judge Glenn also pointed out that within five business days of this Order being issued, or as soon as practically possible afterward, the Debtors are required to submit the Publication Notice.

This notice will be published in The New York Times (National and International Editions) and on CoinDesk.

This approval signifies a significant milestone in Celsius’ journey to emerge from a year-long bankruptcy. It also marks progress toward returning funds to its customers.

This journey took place amid considerable disruptions in the cryptocurrency markets and the apprehension of former CEO Alex Mashinsky on charges of fraud, which he has denied.

Chris Ferraro, who is currently leading the company as interim CEO, stated via email that the company remains deeply committed to achieving the best possible outcome for customers and creditors. He added that their primary goal is to restore value as swiftly as possible.

Under Celsius’ bankruptcy plan, certain cryptocurrency deposits will be returned to retail customers. Additionally, control over the remaining business operations, including bitcoin mining and staking, will be handed over to the Fahrenheit Group.

This consortium incorporates blockchain-based venture capital firm Arrington Capital.

Celsius predicts that a substantial portion of its customers, especially those with interest-bearing Earn accounts, will recover about 67% to 85% of their assets.

This recovery will come through a combination of liquid crypto assets like Bitcoin and Ether, equity shares in the restructured company, and the proceeds of post-bankruptcy legal actions against company founder Alex Mashinsky and others.

Also, customers with non-interest-bearing accounts are expected to receive a comparatively higher level of asset recovery.

Moreover, Fahrenheit Group will invest $50 million to acquire a minority stake in the restructured business. The new company’s stock will also be publicly listed on Nasdaq.

This will allow Celsius customers to trade the equity shares they receive as part of their bankruptcy recovery in line with court documents.

Furthermore, the reorganized company will also pursue legal action against Mashinsky. He is facing criminal charges in the U.S. and a civil lawsuit in New York.

These legal actions are related to allegations of deceiving customers and artificially inflating the value of his company’s proprietary cryptocurrency token.

As per the court documents, Celsius creditors have until September 22, 2023, to submit their votes on the proposed plan. The company aims to obtain final court approval for its restructuring plan on October 2, 2023.

Celsius Woes

Celsius filed a Chapter 11 bankruptcy filing in July 2022 following a rush of customer withdrawals due to declining cryptocurrency prices. This resulted in many customers being unable to access their funds.

Amidst the surge in cryptocurrency prices during the COVID-19 pandemic, crypto lending platforms like Celsius experienced rapid growth.

However, the crypto lending firm was among the first of a series of crypto sector bankruptcies in 2022, when token prices plummeted due to increasing interest rates and persistently high inflation.

Its bankruptcy declaration followed similar actions by Singapore-based crypto hedge fund Three Arrows Capital and competitor crypto lender Voyager Digital.

Due to this, CEO Alex Mashinsky and Celsius’ former Chief Revenue Officer Roni Cohen-Pavon faced allegations of manipulating the company’s cryptocurrency token, Cel, and orchestrating a fraudulent scheme to manipulate the cryptocurrency’s value.

This led to wire fraud charges related to token manipulation, as detailed in the indictment.

Furthermore, on July 13, 2023, the U.S. Securities and Exchange Commission (SEC) took legal action against Mashinsky and Celsius.

The lawsuit claimed that they raised substantial funds by selling unregistered crypto securities and deceived investors about the financial status of the privately held company, as stated in court documents.

Nevertheless, Celsius entered into a non-prosecution agreement with the Department of Justice. In this agreement, the company took responsibility for its involvement in the alleged schemes and committed to continued cooperation with investigative authorities.

About Jimmy Aki PRO INVESTOR

Based in the UK, Jimmy is an economic researcher with outstanding hands-on and heads-on experience in Macroeconomic finance analysis, forecasting and planning. He has honed his skills having worked cross-continental as a finance analyst, which gives him inter-cultural experience. He currently has a strong passion for regulation and macroeconomic trends as it allows him peek under the global bonnet to see how the world works.