Crypto lender Celsius Network, which went bankrupt in June last year, may already be able to end the bankruptcy process.
This is according to a lengthy document filed in the Bankruptcy Court for the Southern District of New York.
Summary
Chapter 11 for crypto lender Celsius Network
Indeed, Celsius had filed for and been granted what is known as Chapter 11, which is that provision of the US Bankruptcy Code that allows companies to attempt a restructuring following a bankruptcy filing.
Thus, Celsius did not immediately go into liquidation, but rather attempted some sort of restructuring so that the bankruptcy proceedings could be concluded without having to go to the length and breadth of a lengthy court proceeding.
Indeed, the above document states that Celsius Network has reached two agreements that allow it to return funds to all customers, thus effectively ending the bankruptcy proceedings a little over a year after its inception.
However, one more step is required before this breakthrough is certified.
On 10 August it will be the turn of Judge Martin Glenn to analyze these agreements to decide whether or not to approve such a conclusion to the legal proceedings.
If the judge gives his approval, Celsius will be able to return the funds to customers.
The agreements
The first of the two settlements resolved claims related to allegations of fraud and misrepresentation, increasing customer clawbacks by 5%.
Through this agreement, former customers who accept it will receive back funds in the amount of 105% of what they have claimed, effectively extinguishing Celsius’ debt to them.
Instead, the second offers an alternative resolution regarding funds from Celsius’ Earn program.
Under this agreement, customers who borrowed cryptocurrency will be able to receive a portion of their funds in crypto, and another in shares in the new company that will emerge from the bankruptcy proceedings.
These are arrangements that have been made together with a representation of creditors, but they will not necessarily be accepted by all former customers.
The future of Celsius
From what emerges from this document, the business may reopen under a new company.
Celsius Network is definitely bankrupt, and it would not even make much sense to try to resurrect it, since by now users have totally lost faith in it.
But should Chapter 11 be successfully concluded, it is entirely possible that the business will resume with another company taking over its assets and services.
Indeed, this is precisely what emerges from the agreements, as some of the former customers are being offered shares in the new company’s own stock as part of the refund.
Nothing is yet known about this hypothetical new company, except that it is supposed to continue Celsius’s operations.
Then again, the bear-market that generated the implosion of Celsius’ accounts is over, and many people are again looking for similar services.
Surely the new company will not only have different partners than Celsius, but more importantly it will have different executives, since Celsius itself once went into bankruptcy sued its own former directors, as well as founders, for fraud.
Crypto lenders like Celsius Network
However, the problem lies even deeper.
Indeed, companies offering crypto loans tend to promise much higher returns than their non-crypto competitors to those who decide to give them their cryptocurrencies to earn interest.
The problem is that those who give them their funds do not always later succeed in getting them back, as was the case with Celsius.
The fact is that in order to be able to pay such high interest, these companies are forced to use the funds obtained from their customers in high-risk activities.
So not only is there no certainty that they will be able to get their funds back, but there is also a relatively high risk that the company may lose them, thus no longer being able to return them to their rightful owners.
This is precisely what has happened to Celsius and other crypto lenders, and could happen again in the future in the event of a new bear-market.
Despite this, there is still market demand for these kinds of services, as many people who own cryptocurrencies are not satisfied with the possible gains from holding them but hope of compounding them.
In particular, those who have stablecoins in their wallets cannot earn absolutely nothing by merely holding, and so they often go in search of other easy and substantial gains.
Therefore since there continues to be such a market demand, at the next bear-market we may see more disasters like that of Celsius.
