Soon, the end of the tunnel… or not. What has happened in the tumultuous Celsius affair since our last news item? In March, we learned that some customers could recover up to 72.5% of their funds. A few dozen Stretto notifications later, the situation has changed a little. Let’s take a closer look.
Recap of the Celsius saga
Before turning to the most recent events, let’s review the major stages of one of the many disasters that marked the crypto ecosystem in 2022.
The June 13, 2022A thunderclap in the already battered world of cryptocurrencies. Celsius, the crypto loan service, ad suspend operations due to market conditions. As a result, users can no longer exchange, transfer or even withdraw their funds from the platform.
Takeover offers are multiplying. Nexo, Goldman Sachs and even FTX, are taking it in turns to rescue Alex Mashinsky’s company. However, the first suspicions of wrongdoing began to surface. Risk management was singled out for particular criticism, with a unreasonable exposure to the market highly volatile cryptocurrency market.
The platform struggles for a month to salvage its assets. This period causes an unbearable emotional elevator for creditors, who see their hopes dashed as the media twists and turns.
Thus, the July 14thCelsius announces that he has requested bankruptcy court protection of New York. This decision, now seals the fate of the crypto lender’s many customers.
Celsius co-founder and CEO, Alex Mashinsky, resigns from his position visit September 27, 2022. Indeed, the many revelations about his calamitous management made his position untenable.
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Time to reorganize
With no captain at the helm, the company embarked on a reorganization process. The aim is to find a buyer and lay the foundations for a new company. In particular, this will make it possible to define the withdrawal terms for creditors.
The February 15Celsius declares that he has concluded a agreement in principle with NovaWulfan investment consulting firm. This is a primer submission or « Stalking horse bid » which allows a bankrupt company to choose the bidder for its assets. In principle, it guarantees a floor price below which other bidders cannot go.
In this context, customers of the « Earn » program were expected to recover around 70% of their deposits in USDC, bitcoins and ethers.
At March 2023creditors who had funds in simple custody, « Custodycan withdraw 72.5% of their assets. This decision concerns only a small proportion of the platform’s users.
The April 22ndCelsius submits the restructuring plan drawn up with NovaWulf to the court. At the same time, the auction process begins. It will end on May 24th and finally theoffer from Fahrenheit Holdings wins the bid. It is a group of several companies such as US Bitcoin Corp, Proof Group and Arrington Capital. They all played an active role in the new company’s operations.
The June 27 last, Fahrenheit proposed its restructuring plan to the New York Bankruptcy Court. The summary is available, starting on page 297. It provides:
- The development of the bitcoin mining business;
- the launch of Ethereum staking;
- listing of the new company on Nasdaq.
In addition, creditors will receive shares in the new company as well as interest.
The plan is not final and will be put to a customer vote. Two mediations will take place in the month of July 2023 with stakeholders. Discussions between Fahrenheit and the community are expected to resume after these two hearings.
In the meantime, the court has authorized Celsius to exchange or sell all altcoins in order to comply with SEC requirements. Indeed, the US financial watchdog considers all crypto-assets with the exception of Bitcoin to be securities.
Celsius users still have a long way to go. What’s more, the war waged by US regulation against the crypto ecosystem does not bode well for the future. The SEC is particularly fussy when it comes to processing Bitcoin spot ETF applications even from financial behemoth BlackRock.
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