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The Fahrenheit consortium, made up of venture capital firm Arrington Capital and miner US Bitcoin Corp, has emerged victorious in the bid to acquire the assets of crypto lender Celsius. The court filings early on Thursday confirmed Fahrenheit’s win, beating rival bidder NovaWulf and securing the assets previously valued at around $2 billion.
This proposed treatment violates every consumer lending law out there.” – David Adler
Under the Plan, the Debtors have elected to treat the Retail Borrow Claims through the Set Off Treatment. See pics below. Although the Debtors are demanding repayment of the loans (ie demanding performance by the Borrowers), the Debtors have no intention whatsoever of… pic.twitter.com/MD5rGWnsU3
— David Adler (@DavidJAdler1991) June 15, 2023
Celsius filed for bankruptcy in July after liquidity issues amid a bank run following plummeting crypto prices. The lender’s failure served as a precursor to challenges other prominent crypto exchanges, lenders, and venture capital firms faced. This led the industry into a significant downturn.
Fahrenheit Secures Acquisition of Insolvent Crypto Lender Celsius, Faces Legal Opposition to Bankruptcy Plan
The deal includes Celsius’s institutional loan portfolio, staked crypto, mining unit, and more alternative investments. To close the deal, Fahrenheit must provide a deposit of $10 million within three days. However, the proposal may face legal opposition from borrowers, who argue that Celsius has failed to return their collateral.
The bankruptcy plan, updated by Celsius, shows the successful bid by the Fahrenheit group. Filed Thursday, it now requires approval from the New York bankruptcy court leading the wind-up process. Nevertheless, creditor pushback is expected because of concerns over compliance with customer lending laws.
Bankrupt crypto lender @CelsiusNetwork has filed the fine print on its sale deal to the Fahrenheit consortium – and not everyone’s happy. @jackschickler reports.https://t.co/1dHkP7uxOi
— Bogdan Duman (@BogdanDuman) June 15, 2023
Representing a group of borrowers, David Adler challenged the proposed treatment and vowed to oppose the plan. He echoed the importance of the Celsius group showing progress and effective communication with stakeholders. According to him, this would help maintain the right to propose a bankruptcy plan. Adler expressed frustration, stating that his clients have been neglected and treated poorly throughout the past seven weeks.
As part of the Fahrenheit deal, the new company will receive a significant amount of liquid crypto. This is estimated to be between $450 and $500 million. Additionally, US Bitcoin Corp plans to set up crypto mining facilities, including a 100-megawatt plant.
Acquisition Finalization Is Subject To Regulatory Approval
The crypto industry has faced regulatory hurdles that affected asset sales. For instance, Binance.US’s acquisition of Voyager’s assets was terminated due to regulatory uncertainties. Accordingly, the acquisition’s finalization is subject to regulatory approval.
The ongoing legal opposition and regulatory considerations surrounding the acquisition and bankruptcy plan highlight the complex nature of crypto-related insolvencies. The outcome of these proceedings will have implications for borrower rights, compliance with lending laws, and the future of distressed crypto lenders. The Celsius-Fahrenheit saga reminds us of the risks and volatility within the crypto industry, emphasizing the importance of robust regulatory frameworks and effective risk management for market participants.
As the crypto industry constantly evolves, all stakeholders must maintain vigilance and adapt to shifting regulatory landscapes. The Celsius-Fahrenheit case, a notable incident in the industry, acts as a crucial turning point that calls for introspection and reflection. This case compels market participants to reevaluate their risk management strategies and compliance measures to ensure alignment with changing regulations.
It highlights the importance of robust and effective risk management frameworks to mitigate potential legal and regulatory risks. Market participants must closely monitor regulatory developments and proactively adjust their operations and policies to maintain compliance. This includes implementing thorough Know Your Customer (KYC) procedures, enhancing Anti-Money Laundering (AML) measures, and fostering transparency in transaction reporting.
By taking heed of this pivotal moment, stakeholders can bolster their resilience in an evolving regulatory environment.
Adapting swiftly and effectively to evolving regulations will mitigate potential legal risks and foster trust and credibility within the crypto industry. This could lead to its long-term growth and sustainability.
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