Celsius Proposes Bankruptcy Crypto Token Issuance as Part of Restructuring Plans

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  • January 25, 2023

Embattled crypto lender Celsius plans to use a new bankruptcy digital currency token to pay off its creditors. 

According to reports, Celsius Network LLC may issue a bankruptcy crypto token to repay creditors. This development forms part of a broader “recovery corporation” scheme by the bankrupt crypto lender to remerge as a new publicly traded company. After fielding several uncompelling acquisition bids, Celsius attorneys opine that liquidating would generate fewer funds than reorganizing.

Celsius Intends to Roll Out Bankruptcy Crypto Token Sooner

Celsius announced that its reorganization and bankruptcy digital asset token plans could happen in “months” subject to regulatory approval. According to the bankrupt company’s attorney Ross M. Kwasteniet, creditors would benefit more from this scheme than attempts to sell hard-to-liquidate assets at depressed prices.

Under the newly-unveiled plan, creditors with locked assets above a certain threshold would receive a unique token. This token, called the Asset Share Token (AST), would reflect the value of said customers’ assets. Additionally, AST holders could either hold onto their tokens, which entitles them to periodic dividends, or sell them on the open market. Celsius also has reimbursement plans for the rest of its customers outside the threshold, which is between 60%-70% of the overall customer base. According to the New Jersey-based bankrupt crypto lending company, these customers would receive a one-time distribution in liquid digital currencies. According to Kwasteniet:

“[The distribution] would be at a discount. We’re not envisioning a full recovery, but it’s a meaningful recovery, Your Honor. 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.”

Kwasteniet also said:

“[Celsius depositors] all have something in common – they all deposited crypto, and they all have a claim for the return of the crypto, and we’re focused on doing a plan that treats them equally … the Earn customers, we think, are going to be treated equally.”

Additionally, Kwasteniet explained that these customers would be entitled to a significant return of value.

Payout Threshold to Be Determined

Celsius has been negotiating with numerous creditor groups over how to establish the new company and token payout plan. However, the company’s lawyers did not specify the payout threshold. According to Kwasteniet, Celsius is still discussing the threshold dollar amount with the Unsecured Creditors Committee (UCC). The company’s attorney also added that it would file court papers detailing its plan later in the week.

Amid its restructuring and reinvention plans, Celsius lawyers also sought permission from the court to sell some unused mining equipment. Furthermore, the company previously argued that its wholly-owned mining subsidiary, Celsius Mining, could one day be profitable again.

Celsius’ bankruptcy case Celsius Network LLC, 22-10964, takes place at the Manhattan-based US Bankruptcy Court for the Southern District of New York.

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Tolu is a cryptocurrency and blockchain enthusiast based in Lagos. He likes to demystify crypto stories to the bare basics so that anyone anywhere can understand without too much background knowledge.
When he’s not neck-deep in crypto stories, Tolu enjoys music, loves to sing and is an avid movie lover.

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