Celsius Creditors Could Recoup Up To 85% Of Holdings If New Proposal Is Approved

Amid the Celsius bankruptcy, permission has been granted to the company by a US bankruptcy judge to consider creditor approval for its bankruptcy plan. Creditors are to vote on Celsius’s plans to sell assets to the Fahrenheit consortium after a judge approved disclosures on Thursday, and creditors are expected to recoup up to 85% of holdings once this is done.

Creditors To Decide Next Steps

The Celsius disclosure statement and solicitation materials at a US Bankruptcy Court hearing in Manhattan which stated Celsius had given creditors sufficient information to vote on the proposed restructuring, has been signed off by Judge Martin Glenn. 

Calsius’ bankruptcy plan to sell assets to the Fahrenheit Group would return some crypto deposits to retail customers and hand control of the available business lines, which includes Bitcoin mining and staking.

Furthermore, Fahrenheit plans to buy a minority stake in the new business for about $50 million and then publicly list the new company’s stock on Nasdaq, allowing customers to sell equity shares that they will receive as part of their bankruptcy recovery, as stated by the court documents.

Although some creditors were utterly against this idea, the official committee appointed to represent junior creditors agrees with this idea and has recommended that Celsius customers vote in favor of it.

The vote involving the sale of assets to a consortium is expected to take place between August 24 and September 22, and creditors will be sent ballots to cast their votes on this plan.

Celsius estimates that customers who had interest-bearing Earn accounts and those who participated in Celsius Borrow Program will receive up to 85% recovery through the return of liquid crypto assets like Bitcoin (BTC) and Ethereum (ETH).

There will also be equity shares in the new company, as well as proceeds of the post-bankruptcy lawsuit against company founder Alex Mashinsky. Mashinsky was arrested in July on multiple fraud charges and manipulation of the price of Celsius token CEL, to which he pleaded not guilty.

However, the now-acting CEO of Celsius, Chris Ferraro has said in an email that the company will “remain laser focused on creating the best outcome for customers and creditors and returning value as soon as possible.”

As this unfolds, the whole process will be supervised by New York Bankruptcy Judge Martin Glenn.

Chapter 11 Process With Fahrenheit

According to the filing plan and Disclosure Statement, Celsius entered an agreement with the Fahrenheit Group to allow Fahrenheit to become a plan sponsor with the goal of providing the company with funding and operational expertise. 

This agreement will allow Celsius to enter into a restructuring transaction with Fahrenheit, which will allow Celsius to maximize the recovery for stakeholders. 

However, if Celsius were to sell all assets to Fahrenheit now, including their cryptocurrency assets, the recovery might be lower than if a new body is set up to continue the operation of certain aspects of the company.