Celsius creditors vote in favor of reorganization plan

• Creditors would receive approximately $2 billion in crypto assets from the insolvent crypto lender.
• Celsius plans to sell assets to crypto consortium Fahrenheit Holdings.

Creditors of the bankrupt cryptocurrency lender Celsius [CEL] have approved a plan that would refund a large part of their holdings. Celsius will sell its assets to crypto consortium Fahrenheit Holdings. Fahrenheit won a bid to acquire Celsius in May 2023.

Creditors will receive approximately $2 billion in crypto assets from the insolvent crypto lender.

In August 2023, the Judge presiding over the case approved the voting mechanism. The majority of the classes in the bankruptcy claim were approved by more than 98% votes in favor of the reorganization. They still await final approval from the court.

The U.S. Bankruptcy Court for the Southern District of New York will hold a confirmation hearing for final approval on 2 October.

The SEC recently filed a limited objection to Celsius’ restructuring plan due to “concerns under the federal securities law.” Notably, the commission, in particular, raised concerns over the American crypto firm Coinbase [COIN]’s involvement in the bankruptcy proceedings.

The lender will also distribute equity in a new company, NewCo.

NewCo will operate and further build out the Debtors’ Bitcoin mining operations, stake Ethereum, monetize the Debtors’ other illiquid assets, and develop new, value-accretive, regulatory-compliant business opportunities.

Fahrenheit Holdings will manage this new company. Fahrenheit is controlled by former Algorand CEO Steven Kokinos, venture capital firm Arrington Capital, crypto miner US Bitcoin Corp, Proof Group Capital Management, and Arrington Capital advisor Ravi Kaza.

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What ensued at Celsius after declaring bankruptcy last year

It was in July 2022 that Celsius filed for bankruptcy as the crypto winter set in after the collapse of the Terraform Labs in May 2022.

In July 2023, the U.S. Securities and Exchange Commission (SEC) sued Celsius and its former CEO Alex Mashinsky for selling unregistered and fraudulent securities offerings involving “crypto asset securities.”

The U.S. Department of Justice also charged Mashinsky the same month with fraudulent financial activity, misleading investors, and other similar charges.

The authorities arrested Mashinsky in July for fraud and price manipulation of the CEL token. The former Celsius CEO has refuted the charges. He was soon released on a bond of $40 million. Early this month, a court ordered the freezing of his banking and real estate assets.

Celsius agreed to a $4.7 billion settlement with the U.S. over fraud claims, stating that the deal would not impede reorganization plans.