Celsius Floats plans to exit bankruptcy by issuing a new token

Celsius Floats plans to exit bankruptcy by issuing a new token

A lot has happened in Celsius' bankruptcy proceedings since the platform originally went under in July.

Between fraud allegations, arguments that customers (or unsecured creditors, according to the firm) have signed over their cryptos, alleged attempts by the former CEO to flee the country, and more, Celsius' legal proceedings have been a wild ride, to say the least. Now the lender's legal team is arguing that a liquidation would make less money for creditors than a restructuring, which may be true.

However, the restructuring process proposed by Celsius’ legal team relies heavily on printing a new token to “support recovery.”

Plan allegedly proposed by creditors

According to Ross Kwasteniet, a lawyer representing the crypto lender in its ongoing bankruptcy case, Celsius' assets would be difficult to liquidate based on current prices. This situation prompted several unnamed corporate creditors to propose a restructuring plan based on a tentatively newly minted recovery token, Bloomberg reported.

There are some precedents – CoinFLEX, Bitfinex and others have developed similar ideas. Unfortunately, regardless of the optimistic language used by these struggling platforms to gloss over the idea, it still creates a token out of thin air while dancing around the topic of what it replaces - stranded assets.

According to court documents, Kwasteniet argued that a "listed company that is properly licensed," the revived version of Celsius would ultimately bring more value to creditors than a liquidation, raising questions about how the company was licensed before its collapse.

Additional documents supporting the proposal are expected to be filed next week and presented to Celsius' creditors for a vote before being formally proposed to the judge presiding over the case.

Tokens to be paid to creditors with significant claims

According to CelsiusFacts, an anonymous Twitter account covering the company's lawsuit, the tokens would be distributed to creditors with claims of more than $5,000.

LATEST NEWS
– #CelsiusNetwork aims for a stratified recovery, smaller holders under 5,000 could get all assets to exit.
– Larger holders receive a promissory note that appears to represent the entire value, allowing you to sell if you don’t believe in the company or the recovery.

— CelsiusFactsNumbers (@CelsiusFacts) January 24, 2023

If the information presented by CelsiusFacts is correct, creditors with assets of less than $5,000 could withdraw all of their assets from the platform. If a creditor claims between $5,000 and $7.5,000, 95% to 100% of the assets are available for payout, depending on the amount. The remaining percentage would be paid out in the recovery token proposed by the lender.

Unfortunately, the proposed plan would not allow withdrawals for those who have deposited more than $7.5k with Celsius. Unfortunately, these users would not receive any compensation other than the recovery token.

Further updates to the proposal will reportedly be discussed in court next week.

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