Celsius's Successor Aims To Revive Crypto Lender: What Does That Mean For Creditors?

The potential successor to the defunct cryptocurrency lender, Celsius CEL/USD revealed its intentions to restart the business without any funded debt and with an initial funding of up to $450 million in cryptocurrency, contingent upon court approval.

This information was disclosed in a recent document submission before a confirmation session scheduled for Monday, The Block reported.

In a recent bankruptcy hearing in New York, the entity, temporarily named NewCo, announced its aim to commence reimbursement to clients with assets locked following the downfall of Celsius in June 2022.

As reported by Bloomberg, this move was seen as the "most favorable recovery" strategy for the affected clients.

The development comes as the crypto industry anticipates the discussions at Benzinga's Future of Digital Assets conference on Nov. 14, which is expected to shed light on the evolving landscape of digital currencies and related businesses.

The investment group Fahrenheit would oversee NewCo's operations.

Additionally, Fahrenheit pledged an investment of up to $50 million for an equity position in the rejuvenated venture.

The compensation for Fahrenheit's leadership team would be in the form of NewCo's ordinary shares.

During the hearing, Celsius's attorney, Christopher S. Koenig, said, “Fahrenheit believes in the business,” adding, “They are putting their money where their mouth is.”

Earlier in May, with Arrington Capital at the forefront, Fahrenheit successfully bid to procure Celsius's assets.

The acquisition included Celsius's institutional lending portfolio, pledged cryptocurrency and Bitcoin BTC/USD mining division.

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The proposed strategy entailed the distribution of Bitcoin and Ethereum ETH/USD, valued at approximately $2 billion, to the creditors "as soon as reasonably practicable," as stated in an August letter from the concerned group, a sentiment echoed in the confirmation hearing document.

Furthermore, NewCo has aspirations to be publicly traded on the Nasdaq to enhance liquidity.

Judge Martin Glenn was in the process of evaluating the viability of NewCo's restructuring proposal, which also required the green light from securities authorities. A significant majority, more than 98% of the creditors affected by Celsius's bankruptcy, endorsed the plan last month, as per official records.

The plan did have its detractors.

A subsidiary of Lantern Ventures, claiming a debt of $82 million, contended the valuation of the new enterprise by Celsius's consultants is inflated, Bloomberg reported.

Should the court give its nod to Celsius's proposition, it would set a precedent as the inaugural revival of a cryptocurrency platform post-bankruptcy, especially after the crypto sector witnessed multiple insolvencies the previous year.

Conversely, a rejection of the plan might push Celsius towards liquidation, potentially diminishing the recovery amounts for the creditors.

Celsius sought bankruptcy protection in July of the preceding year, burdened with massive debts to its investors during a widespread cryptocurrency market slump.

Documentation from August 2022 unveiled a staggering $2.8 billion discrepancy between the company's available cryptocurrency assets and its outstanding debts.

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