Celsius Implements Reorganization Plan to Transition Altcoins into Bitcoin and Ether – Coinpedia Fintech News
In July 2022, crypto lender Celsius faced financial difficulties, leading to its filing for Chapter 11 Bankruptcy. The company encountered a significant shortfall of $1.2 billion in its balance sheet, causing challenges in repaying its customers and creditors. However, there is recent news that the defunct company has revised its bankruptcy filing and is currently awaiting an acquisition deal with the Fahrenheit crypto consortium. These new developments have significant implications for both Celsius and the whole crypto industry. Read on for further details.
Celsius Aims To Convert Altcoins into BTC and ETH
Celsius has introduced a revised plan where they aim to convert all the altcoins held by their customers into Bitcoin (BTC) and Ether (ETH), except for accounts related to custody and withholding. In this new reorganization plan, they propose to address the claims of retail borrowers through a method called “set-off treatment.”
To understand what “set off treatment” means, imagine comparing the losses and profits a borrower incurs within a specific year. If the losses are not completely offset by the borrower’s income in that year, they can carry forward those losses and offset them against their income in future years.
A Twitter user provided an explanation of how this set-off treatment would work for borrowers, depending on the portion of the loan they have already paid back.
In your example, the customer took a $25k loan secured by 2 #BTC — let’s say the customer has paid 20% back and thus has $20k outstanding principal.
If the set-off counts the BTC at 7/13/22 prices, the collateral would be valued at about $40k.
Subtract the $20k principal from… pic.twitter.com/ZCKC1xYegm
— Cam Crews (@camcrews) June 10, 2023
Celsius Restructuring Plan Faces Borrower Opposition
David Adler, an attorney from McCarter & English, raised concerns on Twitter regarding the restructuring proposal put forth by Celsius. He pointed out that Celsius, the debtor, is demanding loan repayment without any intention of fulfilling its contractual obligations, such as returning collateral to the borrowers. This aspect of the proposal is likely to be met with opposition from borrowers, as it violates consumer lending laws at both state and federal levels. Adler also mentioned that a borrower group formed specifically for this purpose will be opposing the plan.
Celsius Seeks Protection for UK Assets and Global Resolution
In an effort to safeguard its UK assets and facilitate a global resolution, Celsius has sought permission to appoint Chris Ferraro as the foreign representative. This appointment is related to a British court’s Cross-Border Insolvency Regulations. By recognizing the United States Chapter 11 as the “foreign main proceedings,” Celsius aims to organize a comprehensive resolution and protect its assets in the United Kingdom.
On May 25, the Fahrenheit crypto consortium, comprising venture capital firm Arrington Capital and miner US Bitcoin Corp, successfully bid to acquire Celsius assets. The estimated value of Celsius assets at that time was approximately $2 billion. Under the terms of the new deal, the newly formed company is expected to receive approximately $450-500 million worth of liquid cryptocurrency, while US Bitcoin Corp plans to establish a 100-megawatt Bitcoin mining plant.
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