Celsius Proposes “Recovery Corporation” to Repay Creditors

The legal team of the bankrupt cryptocurrency lending firm Celsius Network LLC announced on Tuesday that the company is working on reinventing itself as a new, publicly traded “recovery corporation,” adding that it may issue a token to repay its creditors.

According to reports by Bloomberg and some additional information provided by CoinDesk, Celsius’s legal team said that the crypto lender had devised a new plan to reinvent itself as a new, publicly traded “recovery corporation” to exit bankruptcy proceedings. The firm’s new strategy, which, as it stands, has not yet received approval from the U.S. Trustee’s Office, would issue a token called the Asset Share Token (AST) to its creditors with locked assets above a certain threshold that reflects the value of their assets. 

A Twitter user that often provides updates on the case, CelsiusFacts, has also claimed to have discovered details about the restructuring plan:

BREAKING NEWS
– #CelsiusNetwork is looking at having a stratefied recovery smaller holders bellow 5k might get all assets to leave.
– Larger holders will get a debt token that seems to represent all the value, so you can sell if you dont believe in the company or recovery.

— CelsiusFactsNumbers (@CelsiusFacts) January 24, 2023

The legal team added that holders of the AST token would be able to hold their tokens which would entitle them to dividends over time, or they may sell them on the open cryptocurrency market. As for the rest, and the majority of Celsius’s customers, estimated to be between 60% to 70%, they would receive a once-off distribution in liquid cryptocurrencies.

Ross Kwastaniet, a lawyer for Kirkland & Ellis, the law firm representing the bankrupt lender, said:

[The distribution] would be at a discount. We’re not envisioning a full recovery, but it’s a meaningful recovery, Your Honor. Adding, “It would be a one-time distribution in liquid crypto – call it bitcoin, ethereum, or stablecoins. Something that has, you know, readily tradable, readily ascertainable market value to everybody who has claims below a certain threshold.”

The legal team has not disclosed the threshold amount for receiving a pay-out, with Kwastaniet adding that the firm was still in discussions over the dollar amount of the threshold.

“Recovery Corporation” Being Pursued After Receiving No Attractive Bids for Assets

Kwastaniet informed the court that Celsius chose to establish a “recovery corporation” after it received no worthwhile bids for its assets:

The bids we’ve received for discrete assets and for the transfer of customer accounts have not been compelling.

He further stated:

The debtors can’t just simply distribute their assets and move on, so to speak, because the bidding process has revealed that this would require us to sell many illiquid assets at what we believe are fire-sale prices. So, given that, the debtors are focused on placing their assets into a new [company] that would hold those assets and manage them over time to maximize value as markets improve.

Disclaimer: This article is provided for informational purposes only. It is not offered or intended to be used as legal, tax, investment, financial, or other advice.