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The plan by bankrupt cryptocurrency lender Celsius Network to exchange its altcoins for Bitcoin and Ether has been granted by the United States Bankruptcy Court for the Southern District of New York.
Judge Martin Glenn of the Southern District of New York ordered that starting on July 1st, the embattled cryptocurrency company will be permitted to convert all cryptocurrencies that are not Bitcoin and Ethereum into the top two digital assets by market cap.
The liquidations will make it possible for the money to be distributed to creditors soon
Following discussions between Celsius and the U.S. Securities and Exchange Commission (SEC), the plan was formally accepted. According to the bankruptcy judge’s decision, the struggling lender may sell or convert the altcoins:
“The Debtors, in consultation with the advisors to the Committee, may sell or convert any non-BTC and non-ETH cryptocurrency, crypto tokens, or other cryptocurrency assets, other than such tokens that are associated with Withhold or Custody accounts (collectively, the ‘altcoins’), to BTC or ETH commencing on or after July 1, 2023, and ending prior to the effective date of the plan.”
Additionally, Celsius must make an effort to increase the value of the cryptocurrencies it wants to convert to BTC or ETH using “commercially reasonable methods.” A monthly report on the quantity of altcoins converted into Bitcoin and Ethereum must also be submitted by the business.
Following the collapse of the Terra ecosystem and its Terra (LUNA) and TerraUSD (UST) tokens in 2022, Celsius, which saw its native asset drop by over 99% and it was unable to process customer withdrawals, faced insolvency. Soon after, the business was the target of a class action complaint that claimed it was run like a “literal” Ponzi scheme and named numerous of its officials as the offenders, including Alex Mashinsky, who was the CEO at the time.
Letitia James, the New York State Attorney General, filed a lawsuit against Mashinsky at the beginning of 2023, alleging that she had misled investors and neglected to register as required by law. James claims that the former CEO assured investors that he would only be making low-risk bets on established businesses. But he frequently loaned assets to counterparties with a high level of risk. Mashinsky retaliated in May, claiming that James’ accusations were false.
Despite filing for bankruptcy months ago, creditors are still waiting for a response. The recent verdict has prolonged the process and opened up additional possibilities. The US SEC’s continuous investigation into cryptocurrency exchanges and altcoins led to the decision to permit the debtors of the Celsius network to convert their altcoins to Bitcoin and Ether.
Including Cardano, Polygon, and Solana, the financial regulator has so far designated approximately 160 cryptocurrencies as securities. Since then, a lot of cryptocurrency firms have made the decision to switch their holdings from altcoins to Bitcoin and Ether.
Bankrupt Celsius Under New Ownership
On May 25, 2023, the bankrupt cryptocurrency loan platform Celsius was bought by the crypto consortium Fahrenheit. Fahrenheit has made known that it intended to create a new bankruptcy strategy for Celsius Network. The specifics of these proposals have not yet been made public, though. According to the most recent decision, the owners would only distribute the assets in Bitcoin and Ether.
The bid for the institutional loan portfolio, staked cryptocurrency, mining operation, and other investments of the Celsius Network was won by Fahrenheit. The new business was set to receive between $450 million and $500 million in liquid cryptocurrency, in accordance with the order. After being acquired, Celsius planned to negotiate and submit a new plan sponsor agreement with Fahrenheit and a standby plan sponsor agreement with BRIC. Following bankruptcy court permission, the crypto lending company would also submit a revised Chapter 11 plan and a disclosure statement.
Companies like Voyager Digital and FTX had financial difficulties after the Celsius Network filed for bankruptcy, which forced them to consider novel techniques to deal with creditor demands for repayment.
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