- July 4, 2023
- Posted by: [email protected]
- Category:
The United States Bankruptcy Court for the Southern District of New York has granted Celsius debtors the right to trade their cryptocurrencies for Bitcoin or Ethereum, which is a significant milestone. This ruling, delivered on June 30th by bankruptcy judge Martin Glenn, attempts to expedite the upcoming distribution of funds to creditors.
The approval for selling and trading cryptocurrencies was obtained after extensive discussions between Celsius and the US Securities and Exchange Commission (SEC). However, it is important to note that the court order does not permit the sale or trade of tokens associated with Withholding or Custody accounts.
Celsius Network filed for bankruptcy in the wake of Terra’s collapse on July 13, 2022, which exposed a staggering $10 billion in liabilities. Subsequently, on May 25, 2023, the cryptocurrency consortium Fahrenheit acquired Celsius, a struggling crypto lending platform. Fahrenheit has expressed its intention to develop a revised bankruptcy plan specifically for Celsius Network, although the specific details of these plans have not yet been disclosed. What is clear from the latest ruling is that the assets will be exclusively distributed in the form of Bitcoin and Ether.
Fahrenheit emerged as the winning bidder to acquire Celsius Network’s institutional loan portfolio, staked cryptocurrencies, mining unit, and other investments. As per the court ruling, the new company is expected to receive a substantial amount of liquid cryptocurrencies, estimated to be between $450 million and $500 million.
Following the acquisition, Celsius intends to negotiate and submit a new plan sponsor agreement with Fahrenheit, as well as a backup plan sponsor agreement with BRIC. Additionally, the crypto lending firm will file a revised Chapter 11 plan and a disclosure statement, subject to approval from the bankruptcy court.
The decision to allow Celsius Network’s debtors to convert altcoins into Bitcoin and Ether arises amidst the ongoing regulatory scrutiny of crypto exchanges and altcoins by the US SEC. To date, the financial regulator has classified over 160 cryptocurrencies as securities, including prominent ones like Cardano, Polygon, and Solana. Consequently, numerous crypto companies have opted to convert their altcoin holdings into Bitcoin and Ether as a precautionary measure.
Overall, the approval for Celsius debtors to trade their altcoins for Bitcoin and Ether marks a significant step in the bankruptcy proceedings, enabling the facilitation of creditor payments while adhering to the evolving regulatory landscape in the cryptocurrency industry.
