Celsius, a now-defunct cryptocurrency lender, has modified its bankruptcy filing and is currently awaiting approval from a bankruptcy court in New York following the successful acquisition deal with the Fahrenheit crypto consortium. On June 15, the crypto lender filed its reorganization plan.
As per the modified plan, Celsius will transform all alternative cryptocurrencies from its clients, except for accounts categorized as “Custody and Withhold,” into Bitcoin (BTC) valued at $25,548 and Ether (ETH) valued at $1,664, beginning from July 1.
The recently introduced reorganization plan suggests that retail borrowers’ claims will be addressed through the implementation of the set-off treatment. The set-off treatment pertains to the comparison of losses against profits within a given year. Any losses that cannot be offset against income in a particular year can be carried over to subsequent years and offset against income. A Twitter user has elaborated on how the set-off treatment would operate for borrowers based on the proportion of the loan they have repaid.
David Adler, a legal expert from McCarter & English, expressed his opinion on Twitter that Celsius’ restructuring proposal may encounter resistance from its borrowers. He highlighted that the debtor, Celsius, is seeking repayment of the loans, but has no intention of fulfilling its contractual commitments, such as returning the collateral to the borrowers. This could be a point of contention for the borrowers, according to Adler.
“This proposed ‘treatment’ violates every consumer lending law out there (state, federal) and the ad hoc Borrower group will be opposing this plan.“
Moreover, Celsius has requested authorization to designate Chris Ferraro as the foreign representative in compliance with the British court’s Cross-Border Insolvency Regulations in the United Kingdom. By doing so, the company’s assets in the United Kingdom would be protected, and the Chapter 11 proceedings in the United States would be recognized as the “foreign main proceedings” to facilitate a comprehensive solution globally.
The Fahrenheit crypto consortium, consisting of Arrington Capital, a venture capital firm, and US Bitcoin Corp, a miner, successfully secured the bid to acquire Celsius assets on May 25. The value of Celsius assets was estimated to be approximately $2 billion at that time. As per the new agreement, the new entity is anticipated to receive nearly $450-500 million worth of liquid cryptocurrency, and US Bitcoin Corp intends to build a 100-megawatt Bitcoin (BTC) $25,552 mining facility.
Celsius suspended withdrawals on June 13, 2022, due to its involvement in unprofitable investments and the spread of crypto contagion following the downfall of the Terra ecosystem.
