After the first court hearing in its Chapter 11 bankruptcy proceedings, Celsius has provided details for how customers can make a claim, and also says it wants to present a plan to the court “that will provide customers with an option to remain long crypto.”
Celsius has advised customers and creditors of its first court appearance since filing for Chapter 11. One strategy presented by the company to make investors whole is to merely wait until the price of Bitcoin goes up again. “It is our intention to file a plan that will provide customers with an option to remain long crypto,” the company said in an email to customers.
Certainly in the case of stablecoin investors, an increase in the price of Celsius’s non-stablecoin holdings of Bitcoin and Ethereum, for example, would enable the company to sell those assets at a profit and pay off its stablecoin debts.
Celsius also said its US Trustee is forming a creditors committee, and as such its customers whose funds are currently locked on the platform, will be able to be involved in negotiating the plan of reorganization that Celsius will submit for court approval. Creditors who want to be involved and ask any questions in that regard can email firstname.lastname@example.org with questions.
In addition, Celsius has provided details on how its customers can initiate a claim for locked funds via its trustees Stretto. More information on how to file claims is available at https://cases.stretto.com/celsius. Stakeholders with questions may call Celsius’ Stretto at +1 (855) 423-1530 (U.S.) or +1 (949) 669-5873 (international).
Celsius will next appear in court in relation to its Chapter 11 filing on August the 8th.
The Celsius Bankruptcy
Celsius Network announced on July 14th that it had initiated voluntary Chapter 11 proceedings.
In a post on its website the company said, “Celsius has initiated a financial restructuring process to provide the company with the best opportunity to stabilize the business and consummate a comprehensive restructuring transaction that maximizes value for all stakeholders.”
To implement the restructuring, the company and certain of its subsidiaries filed voluntary petitions for reorganization under Chapter 11 of the U.S. Bankruptcy Code in the United States Bankruptcy Court for the Southern District of New York.
Members of the Special Committee of the Board of Directors said, “Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilize its business and protect its customers. Without a pause, the acceleration of withdrawals would have allowed certain customers—those who were first to act—to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they receive a recovery.”
“This is the right decision for our community and company,” said Alex Mashinsky, Co-Founder & CEO, Celsius. “We have a strong and experienced team in place to lead Celsius through this process. I am confident that when we look back at the history of Celsius, we will see this as a defining moment, where acting with resolve and confidence served the community and strengthened the future of the company.”
Chapter 11 is a process in the U.S. through which companies can restructure their financial obligations while operations continue. Many well-known companies have successfully reorganized under Chapter 11 and emerged stronger, including American Airlines, Delta, General Motors, Hertz, and Marvel. For more information about Chapter 11 filings, Celsius has uploaded a video to YouTube. Court documents relating to the filing can be found here.
Celsius to Continue to Operate, Withdrawals Remain Paused
The company says it has $167 million in cash on hand, ample liquidity to support certain operations during the restructuring process. To ensure a smooth transition into Chapter 11, Celsius has filed with the Court a series of customary motions to allow the company to continue to operate in the normal course. These “first day” motions include requests to pay employees and continue their benefits without disruption, for which the company expects to receive Court approval.
Most customer account activity will remain paused until further notice. Withdrawals, Swap, and transfers between accounts will remain paused, and rewards will stop accruing as of the date of the filing. Celsius is not requesting authority to allow customer withdrawals at this time.
It was revealed last week that Celsius has appointed restructuring and distressed asset expert Alan Carr to its board, according to documents filed with the UK companies office. Mr Carr is the CEO of New York based Drivetrain LLC, a high-end fiduciary consultancy with expertise in leading complex restructurings and litigation, and managing portfolios in distressed investments. Celsius has also appointed XOUT Capital founder David Barse to its board. Carr and Barse join CEO Alex Mashinsky and co-founder Shlomi Daniel Leon, as directors.
At the end of June, Celsius removed Laurence Anthony Tosi, John Stephen Dubel, and Gilbert Nathan from their director’s roles with the company. Mr Dubel is the founder of restructuring experts Dubel & Associates. He was appointed to the Celsius board on the 20th of June and removed eight days later.
Mr Nathan is the managing director of financial consulting firm Jackson Square Advisors. He joined the Celsius board on June 17th and was removed from the role on the 29th. The managing partner of investment firm Westcap Group, Mr Tosi had been a Celsius board member from December 3rd 2021 until his appointment was terminated on the 22nd of June.
It has been widely reported that Celsius has paid down around $183 million in debt since July 1st which has freed up the collateral that was securing those loans (crypto loans are usually over capitalized).
The Celsius Collapse
On the 13th of June 2022, Celsius emailed its customers to advise it had ceased withdrawals. The move rocked the crypto world and saw the price of Bitcoin plummet. Since that time Celsius has shared no information about when it would recommence withdrawals on its Twitter and other social media channels. Today’s update from Celsius has still given no update on when investors may be able to withdraw their assets.
Although it has not been officially confirmed, it is understood that Goldman Sachs and several other traditional and crypto finance organizations (Nexo is one) are looking to purchase the Celsius business in a potential bankruptcy-induced distressed asset sale.
While there is very little transparency around what caused the Celsius collapse, it is understood the platform was very exposed to high-risk DeFi investments, and was heavily impacted by the collapse of the LUNA / Terra ecosystem. As of the 14th of July, the Celsius website remains operational, and the company is even advising its customers that their deposits are continuing to earn weekly interest.
Founded in 2017 by billionaire tech entrepreneur Alex Mashinsky along with S. Daniel Leon, Celsius Network is headquartered in London and prior to its collapse offered crypto borrowing, lending and other payment services. While Celsius’s yield rates for deposits were high, they were not crypto’s highest. More on rates here.
The company also has offices in the U.S. and Lithuania. Celsius joined the Bitcoin Mining Council in July 2021 and was a major investor in Bitcoin mining solutions in the United States. In January 2022 Celsius announced its October 2021 $400 million investment round was oversubscribed and had actually raised $750 million. Prior to the events of June 13th, the company’s interest rates for deposits and borrowing were typically stable with low volatility.
Article originally published at Brave New Coin.