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Celsius Loan creditors plan appeal of Celsius' reorganization plan amid frustrations over recoveries
Companies • April 25, 2024, 5:16PM EDT
Published 1 minute earlier on
Quick Take
- Celsius Loan creditors are actively looking into filing an appeal of Celsius’ reorganization plan as they see lower-than-expected recoveries from the fallen lender’s estate.
- The group of creditors is talking to several lawyers about filing an appeal premised on two key claims.
Some crypto traders are preparing to appeal the Celsius reorganization plan to challenge what they perceive as an "unfair" agreement that disproportionately favors Celsius Earn creditors over Celsius Loan creditors, sources familiar with the matter told The Block. This plan, they claim, has significantly diminished the recoveries for those holding debts from the lender's estate. Creditors who took loans from Celsius are consulting with "several" lawyers regarding their appeal plans. One source informed The Block that they are attempting to recover some of the funds they used as collateral on the now-defunct platform. Celsius Loan creditors have not specified when they will officially file the appeal, as they are still in the preliminary stages of preparing for the legal process, a source told The Block. This source also said that the lender’s major Loan creditors would finance the forthcoming legal action. This legal challenge over creditors’ claims coincides with a resurgence in digital asset prices, raising two critical questions for bankruptcy courts and their stakeholders: the true value of creditors' crypto holdings and the form in which these holdings should be returned. Chief Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York approved Celsius’ restructuring plan last November, over a year after the lender declared bankruptcy in July 2022. However, the execution of this plan resulted in lower-than-expected payouts for Celsius Loan customers, with some creditors alleging they received less than 30% of what they believed they were owed, according to one creditor. According to a source close to the matter, Celsius Loan account holders are considering an appeal based on two main claims. The first claim asserts that the court failed to ensure "fair and equal" treatment between two groups of creditors: users of Celsius Earn, an interest-yielding crypto account, and customers of Celsius Loan, a collateralized crypto loan service. A creditor told The Block that Earn creditors' claims were processed earlier this year, weeks before those of Loan customers, resulting in higher recoveries for users of the company's flagship interest-bearing product. The second claim challenges an order dated December 27, 2023, which directs that Celsius’ new mining entity be capitalized with $225 million from the lender's bankruptcy estate. Some Loan creditors argue that this funding should have been allocated toward enhancing creditors’ recoveries instead, one creditor noted. Celsius' lawyers had not responded to The Block’s request for comment at the time of reporting. It should be noted, however, that the valuation and payout of a bankruptcy claim involve numerous factors, complicating comparisons of creditors’ recoveries. Disclaimer: The Block is an independent media outlet that delivers news, research, and data. As of November 2023, Foresight Ventures is a majority investor of The Block. Foresight Ventures invests in other companies in the crypto space. Crypto exchange Bitget is an anchor LP for Foresight Ventures. The Block continues to operate independently to deliver objective, impactful, and timely information about the crypto industry. Here are our current financial disclosures. © 2023 The Block. All Rights Reserved. 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.
About Author
Elizabeth Napolitano is a data reporter covering business and technology news, with a focus on cryptocurrencies. Prior to joining The Block, Elizabeth reported on BigTech, AI, crypto and videogames for CBS Moneywatch. As a CoinDesk reporter, she covered DeFi, NFTs and U.S. courts. She holds an MA in Journalism from CUNY. Follow her on X: @LizKNapolitano
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