Celsius Unveils Recovery Plans in Bankruptcy Hearing

Celsius Network detailed new recovery plans today during its bankruptcy hearing and in a related court document.

Celsius Unveils Recovery Plans in Bankruptcy Hearing
Celsius CEO Alex Mashinksy (Photo by Dania Maxwell/Bloomberg)

Key Takeaways

  • Celsius' first bankruptcy hearing was held on Monday.
  • In the hearing and a related document, the firm detailed plans that will allow customers to recover their balances.
  • Celsius suspended withdrawals on June 12; users have been waiting for over a month to access their accounts.

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A document has revealed that Celsius customers will be able to claim partial balances in cash or go long on crypto.

Celsius Has Plans for Recovery

Celsius representatives appeared in court today for the company’s first bankruptcy hearing.

Celsius suspended user withdrawals last month, and for today’s hearing, the company created prepared a presentation outlining its plans for users to recover funds. That document says the firm will create a plan to allow users to take cash at a discount or opt for “long crypto.”

The plan will also help the company maximize returns among shareholders and provide a way to reorganize the company under Chapter 11 of the U.S. Bankruptcy Code.

Celsius will also negotiate a restructuring plan with its stakeholders, as reported on June 30.

Furthermore, the firm plans to use its Bitcoin mining operations and third-party asset sales to raise capital.

Court Hearing Provides Further Detail

Financial Times reporter Khadim Shubber published a partial transcript of Celsius’ bankruptcy hearing today.

During the hearing, Celsius’ lawyer—Pat Nash of Kirkland and Ellis LLP—described the company’s plans in further detail.

Nash said that the recovery plans do not involve complete liquidation. He explained that the company does “not intend to force customers to take their recovery in fiat.”

He believes that most customers are interested in “riding out this crypto winter” by keeping their crypto positions. Users will have the “opportunity to realise their recovery” as the macro environment improves, he says.

Celsius’ Current Financial Status

Celsius’s bankruptcy filing last week indicated that Celsius had $4.3 billion of assets. It also had $5.5 billion of liabilities and owed $4.7 billion of that amount to its user base.

Nash said today that the company had $1.75 billion in cryptocurrency assets, down from $14.5 billion in March.

He argued that those losses were mainly due to market prices rather than Celsius’s own actions. Nash said that $1.9 billion of those losses were due to user withdrawals, while $900 million was liquidated by third parties such as Tether.

Nash also noted that Celsius’ custody accounts hold about $180 million, or 4% of the company’s crypto assets. These funds are currently separate from the firm’s earn accounts, but the judge in the case will decide whether those funds will be returned to customers or grouped with other assets.

While Celsius unwound various collateral positions earlier, it has now ceased virtually all business operations, Nash said.

Still, there are plans for financing in the future. The firm expects to mine 10,000 BTC ($215 million) this year. It also plans to sell a recently acquired company, GK8, for $115 million.

Litigation Could Last for Years

Celsius first suspended withdrawals on June 12. As such, investors have been waiting for over a month to access their balances.

Though Celsius’ recovery plans may help it gain some investors’ trust, others are taking legal action.

At least two lawsuits against Celsius are now underway: one originating in Arkansas and another in New Jersey. KeyFi CEO Jason Stone has also filed charges against the company.

However, it is unclear whether those lawsuits will be effective. Reuters reported last week that litigation could last for years. Bankruptcy lawyers said that, given the bankruptcy filing, lawsuits, and restructuring, users are unlikely to see a speedy resolution.

Disclosure: At the time of writing, the author of this piece owned BTC, ETH, and other cryptocurrencies.

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