NEW YORK (Reuters) – Crypto lender Celsius Network has received permission from a U.S. bankruptcy judge to seek creditor approval for its bankruptcy plan. The plan aims to exit Chapter 11 and establish Celsius as a new entity owned by its creditors.
During a U.S. Bankruptcy Court hearing in Manhattan, Judge Martin Glenn approved Celsius’s disclosure statement and solicitation materials. The judge stated that Celsius had provided sufficient information for creditors to vote on the proposed restructuring.
The plan has faced opposition from some creditors. However, the official committee representing junior creditors supports the plan and will recommend that Celsius customers vote in favor.
New Jersey-based Celsius filed for Chapter 11 protection in July 2022, following other crypto lenders that went bankrupt due to the rapid growth of the industry during the COVID-19 pandemic. At the time of filing, Celsius had 600,000 customers holding approximately $4.4 billion in interest-bearing Celsius accounts, as stated in court documents.
Under the bankruptcy plan, Celsius intends to return some crypto deposits to retail customers. Additionally, control of remaining business lines, such as bitcoin mining and staking, will be handed over to the Fahrenheit Group. The Fahrenheit Group consists of a consortium that includes blockchain-based venture capital firm Arrington Capital.
Celsius estimates that most of its customers, who held interest-bearing Earn accounts, will receive a 67% recovery. This recovery will consist of the return of liquid crypto assets like Bitcoin and Ether, equity shares in the new company, and proceeds from post-bankruptcy litigation against company founder Alex Mashinsky and others. Customers with non-interest-bearing accounts will generally receive a higher recovery.
As part of the bankruptcy plan, Fahrenheit will purchase a minority stake in the new business for $50 million. The new company’s stock will be publicly listed on Nasdaq, allowing Celsius customers to sell the equity shares they will receive from their bankruptcy recovery, according to court documents.
The reorganized company intends to pursue litigation against Alex Mashinsky, the company’s founder. Mashinsky currently faces U.S. criminal charges and a New York civil lawsuit for allegedly misleading customers and artificially inflating the value of his company’s proprietary crypto token. Mashinsky has pleaded not guilty.
Celsius creditors have until September 20th to submit their votes on the proposal. Celsius plans to seek final court approval for its restructuring plan on October 2nd, as stated in court documents.
(Reporting by Dietrich Knauth, Editing by Alexia Garamfalvi and David Gregorio)
Credit: The Star : Tech Feed
