Celsius faces backlash after unveiling dull recovery plan to exit bankruptcy

Amid the ongoing bankruptcy hearing, the now-collapsed crypto lender Celsius Network has unveiled a plan to exit the process by rebranding it into a publicly traded recovery corporation.

Celsius lawyers shared that if the plan is approved, creditors with locked assets above an unspecified threshold will receive a token called the Asset Share Token (AST). Notably, the AST to be received will reflect the value of their assets, and holders would be entitled to earn dividends or sell them on the open market.

However, the plan has received backlash from the crypto community, with commentators terming it a potential scam. In particular, a Twitter user and commentator by the pseudonym Crypto_Tolkien suggested that the reorganization is a scam while questioning the issuance of a new token instead of the users’ originally deposited cryptocurrencies. 

“The fake reorganization is a scam to steal more of your funds locked on their platform and issue you a worthless “NEWCO” token instead of your Bitcoin, Eth, or Link. They are trying to block any other plan from being considered besides their own,” he said in a tweet on January 29. 

Controversy around payout threshold 

It is worth noting that the threshold for releasing the token has not been set, with Celsius lawyers stating that there are ongoing discussions around the matter with the Unsecured Creditors Committee (UCC). Consequently, Crypto_Tolkien alleged that the two entities are planning to steal more money.

“Celsius and the UCC are planning right now to steal your money that you withdrew 90 days prior to Celsius declaring bankruptcy through clawbacks. They don’tdon’t care if you used that money to pay taxes or for hospital bills. They will put a lien on your house and garnish your wages,” he said. 

Failure to get the right bids

Indeed, according to Celsius, the option for recovery was explored after the company failed to receive the right bids. The platform, however, clarifies the recovery would be partial. 

Currently, it is unclear whether the recovery plan will affect a previous update on withdrawing assets from the platform. Notably, Celsius troubles began after the company halted withdrawals citing liquidity issues. 

As reported by Finbold, the court ruled that Celsius should return deposits to specific customers whose funds were not mixed with other assets. Consequently, Celsius announced that it would communicate further regarding the way forward.