On Thursday, an American bankruptcy judge stated that cryptocurrency lender Celsius Network may be required to seek a new creditor vote on its intended transition into a bitcoin mining firm. This statement was made at a court hearing in the United States.
Last week, Celsius announced that it had curtailed its post-bankruptcy business plans to concentrate solely on Bitcoin mining. The company cited the suspicion of the United States Securities and Exchange Commission (SEC) over its other planned business lines as the catalyst for this decision.
On Thursday, United States Bankruptcy Judge Martin Glenn of New York, who supervises the Chapter 11 process for Celsius, voiced his dissatisfaction with the late turnaround. He stated that he had a “broken record” regarding Celsius’s need to agree with the Securities and Exchange Commission.
“This is not the deal that the creditors voted on,” according to Glenn. According to him, the modifications to the agreement may be met with “substantial opposition” from creditors.
Before its approval, the Securities and Exchange Commission (SEC) did not express a definite objection to Celsius’s bankruptcy plan. Still, Celsius claimed that the SEC hesitated to approve crypto lending and staking activities, which the SEC had previously rejected.
At the hearing on Thursday, Chris Koenig, a counsel for Celsius, claimed that the firm’s bankruptcy plan, which the court authorized, provided the company with the option to transition to a mining-only operation. According to him, a fresh vote is unnecessary because the new contract is just as beneficial for creditors as the previous one.
As a result of the fast expansion of the cryptocurrency lending sector during the COVID-19 epidemic, Celsius was one of numerous cryptocurrency lenders who went bankrupt and sought protection under Chapter 11 in July 2022.
According to Koenig, the revised bankruptcy plan for Celsius releases $225 million in cryptocurrency assets that, under the previous bankruptcy plan for Celsius, would have been under the control of a group of outside investors known as Fahrenheit.
According to court records submitted on Thursday, creditors of Celsius can anticipate a recovery of 67% under the revised plan. This represents an improvement over the 61.2% recovery expected under the Fahrenheit contract.
American Bitcoin Corporation, which had earlier submitted a bid as a member of the larger consortium that also included Arrington Capital, will manage Celsius’s mining operation once the company declares bankruptcy, according to the latest plan. Celsius picked US Bitcoin over Blockchain Recovery Investment Consortium (BRIC), which it had selected as a backup bidder following an auction that ended in May. Arrington and other bidders from Fahrenheit will not be a part of the new firm. Celsius also opted to go with US Bitcoin.
A representative of BRIC stated on Thursday that Celsius ought to have adhered to the terms of its backup bid agreement rather than negotiating a new arrangement with Bitcoin in the United States. When asked about the BRIC contract, Celsius attorney Koenig called it “stale.” He stated that the more current work that US Bitcoin has done on the Fahrenheit offer makes it a superior alternative.
Two clients whose attorneys did not represent them disagreed with the transaction in court documents submitted on Wednesday. They argued that Celsius ought to be liquidated entirely instead.
