Celsius Approved to Send Adjusted Bankruptcy Plan to Creditors (Report)

The now-defunct cryptocurrency lending company Celsius Network reportedly received permission from US Judge Martin Glenn to send a restructured bankruptcy plan to creditors, seeking their approval.

If accepted, affected customers could retrieve up to 67% of their funds through a return of liquid digital currencies such as bitcoin.

Plan Into Motion?

According to a recent Reuterscoverage, Celsius can now introduce an advanced bankruptcy proposal to its creditors that could make them owners of a new entity. Affected clients will get the chance to take back some crypto deposits and obtain control of Fahrenheit Group (a consortium consisting of US Bitcoin Corp., the blockchain-based venture capital firm Arrington Capita, and other organizations).

Celsius determined that the amended plan will enable most clients with interest-bearing Earn accounts to retrieve up to 67% of their funds. The return will be funded via liquid cryptocurrencies such as BTC and ETH, equity shares in the new firm, and proceeds generated from the legal action against Alex Mashinsky (former CEO of the crypto lender)

Fahrenheit is expected to purchase a minority stake in the upcoming business for $50 million and will list the entity’s stock on Nasdaq. This will allow Celsius clients to sell equity shares they will receive as part of the bankruptcy proposal.

The new organization will pursue litigation against Mashinsky. US law enforcement agents arrested him last month over allegations that he conducted securities, commodities, and wire fraud and scammed users by misleading them about the firm’s actual business. The entrepreneur, who pleadednot guilty to all charges, was later released on a $40 million bond

According to the report, some creditors are against the bankruptcy plan, but the official committee appointed to represent junior creditors is in favor and will advise customers to vote “yes.”

The Alleged Fraud Resulted in Multi-Billion Losses

The once-prominent crypto lender suspended all withdrawals, swaps, and transfers last June, citing “extreme market conditions.” The company’s problems intensified a month later when it filedfor bankruptcy protection with the Southern District of New York

While the condition of the digital asset industry was indeed not quite favorable at the time, some regulators argued that there might be other contributing factors behind Celsius’ collapse, such as fraudulent actions of its management team, led by Alex Mashinsky

The US Federal Trade Commission (FTC), the US Securities and Exchange Commission (SEC), and the US Commodity Futures Trading Commission (CFTC) are among the agencies thatpressedcharges, alleging him of violating several rules, making misleading statements to customers, and manipulating the price of CEL (the native token of Celsius).

According to estimations, the crypto lender owes $4.7 billion to over 100,000 creditors. While Celsiusagreedto pay the substantial sum (as directed by the FTC), the transfer will happen only when fallen investors retrieve their assets