Celsius Network receives consent on bankruptcy plan approval

Celsius had 600,000 customers who held nearly $4.4bln in interest-bearing Celsius accounts when it filed for bankruptcy, according to court documents

Crypto lender Celsius Network on Monday received a U.S. bankruptcy judge’s consent to seek creditor approval for its bankruptcy plan, moving forward a plan to exit Chapter 11 as a new entity owned by its creditors.

Judge Martin Glenn signed off on Celsius’s disclosure statement and solicitation materials at a U.S. Bankruptcy Court hearing in Manhattan, saying Celsius had given creditors adequate information to vote on the planned reorganisation.

Some creditors are against the plan, but the official committee designated to represent junior creditors backs it and will propose that Celsius customers vote in support.

New Jersey-based Celsius filed for Chapter 11 protection in July last year, one of several crypto lenders to go bankrupt after the swift growth of the industry during the pandemic. Celsius had 600,000 customers who held nearly $4.4bln in interest-bearing Celsius accounts when it filed for insolvency, as per court documents.

Celsius’s insolvency plan would return some crypto deposits to retail customers and hand control of remaining business lines – including bitcoin mining and staking – to the Fahrenheit Group, a consortium that includes blockchain-based VC company Arrington Capital.

Celsius estimates that most of its customers, who had interest-bearing Earn accounts, will get a 67 per cent recovery, through return of liquid crypto assets such as Bitcoin and Ether, equity shares in the new firm, and proceeds of post-bankruptcy litigation against firm founder Alex Mashinsky and others.

Fahrenheit will buy a minority stake in the new business for $50mln and will publicly list the new firm’s stock on Nasdaq. This will permit Celsius customers to sell equity shares that they will receive as part of their bankruptcy recovery, as per court documents.

The reorganized firm will pursue litigation against Mashinsky, who already faces U.S. criminal charges and a New York civil lawsuit for allegedly deceiving customers and artificially raising the value of his firm’s propriety crypto token. Mashinsky has pleaded not guilty.

Celsius creditors have a September 20 deadline to vote on the plan, and Celsius plans to seek final court approval of its reorganisation plan on October 2, as per court documents.