Celsius’ Chapter 11 proceeding
An overview of the recent events in the case.
With the Bitcoin Interest Account, users were able to invest bitcoin with Celsius Network and earn weekly interest. Now, Celsius has filed for voluntary petitions for reorganisation under Chapter 11 of the U.S. Bankruptcy Code. Due to the complex nature of recent events, we want to help you get a better understanding of the Chapter 11 filing, as well as an overview of some of the events that have led to the filing of bankruptcy protection by Celsius.
Celsius Network, the cryptocurrency finance platform and lender that is facing a liquidity crisis, has filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York on 13th of July, 2022.
The company explained in its press release that it paused customer account withdrawals on June 12 because “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”.
According to the press release that accompanied the filing, the company is not requesting authority to allow customer withdrawals at this time. Celsius maintains that under its user agreements, assets deposited by customers are its property and not customer property. “Customer claims will be addressed through the Chapter 11 process,” the press release indicates.
The first day declaration of CEO and co-founder Alex Mashinsky says the company intends to use the chapter 11 filing to “stabilise its business” and “consummate a comprehensive restructuring transaction” that will allow it to “emerge from chapter 11 positioned for success in the cryptocurrency industry.”
Mashinsky says that as a result of the company’s asset-preservation strategies, it holds approximately $4.3 billion in assets and $780 million in “non-user liabilities” as of the petition date. The petition lists $1 billion to $10 billion in both assets and liabilities. The debtors disclose book value assets of $4.32 billion and total book value liabilities of $5.5 billion as of Wednesday, July 13.
The debtors provide the following balance sheet as of July 13:
Celsius describes the majority of its liabilities as relating to user accounts and says it has approximately 1.7 million registered users, including approximately 300,000 active users with account balances greater than $100.
The first day declaration lists Symbolic Capital Partners Ltd. as the only secured creditor, holding a $23.1 million contingent claim collateralized by “Ethereum pursuant to the Master Loan Agreement” dated October 21, 2021 with Celsius Network Limited.
Stretto will serve as the debtors’ claims and noticing agent. For more information on the debtors representatives and company`s directors please visit here.