HomeCryptoCelsius will pay back two billion in crypto

Celsius will pay back two billion in crypto

Yesterday, news broke that Celsius will be returning at least $2.03 billion in crypto to creditors.

The news was spread by the unofficial X-Profile Celsius NewCo Community, which collects and publishes the most important news about the Celsius bankruptcy case.

The prosecution

However, in order to proceed with the repayments, the company needs to get the green light from the court. 

Indeed, last year the company filed for and obtained Chapter 11 status under the US Civil Code, which governs bankruptcy proceedings, so any action must be approved by the bankruptcy court handling the case. 

The filing was made yesterday and is expected to be approved. 

It should be noted that Chapter 11 allows the company to reopen and, in fact, the proposal is to create a NewCo that will receive $450 million from the former bankrupt company. 

Thus, creditors will not be repaid in full, but in part, and some of the available funds will go to NewCo. It should be noted, however, that the $450 million is a loan, so it is not necessarily money that Celsius had on deposit from its customers. 

In fact, NewCo is backed by a consortium of companies called Fahrenheit LLC, which is interested in managing the mining and, in particular, the staking.

The Celsius crypto platform

Celsius, on the other hand, was best known for its crypto loans. 

In other words, it allowed customers to deposit cryptocurrencies on its platform in exchange for interest. 

In theory, this interest should have come from the interest paid by those who borrowed the funds, but instead the company also used customer funds to engage in speculation and risky financial transactions that ultimately proved counterproductive. 

In fact, the interest rates it promised appeared to be much higher than those prevailing in the credit market, which is probably why it was forced to look for other sources of return. 

Finally, when the crypto market collapsed as a result of the implosion of the Earth/Moon ecosystem, the company’s speculations began to produce losses instead of profits, and the system imploded. 

As soon as they realised that they could no longer allow customer withdrawals due to lack of funds, they shut everything down and declared bankruptcy, filing for Chapter 11.

The next steps

Everything depends on the judge’s decision, but the proposed plan has the support of the vast majority of creditors. 

If, as expected, it is approved, it will be necessary to wait for the company to announce how it will receive the funds. 

It will then presumably have to follow a procedure to be announced later and wait for the judge to give the go-ahead for the actual return of the funds. 

At that point, in theory, NewCo could also start operating, since if the judge also approves the $450 million earmarked for it, there should be no obstacle to it starting operations. Indeed, it should be emphasised that this is a de facto new company, so as soon as it has the funds it can start operating. 

However, it is not yet clear what services it will be able to offer to former Celsius customers.

 Crypto failures of 2022: Celius among the most important

Celius was neither the first nor the last crypto failure of 2022. 

Nor was it the most important, as it was unfortunately overtaken by FTX‘s. 

However, after the implosion of Earth/Moon in May and the closure of FTX in November, Celsius’ was the third crypto failure of 2022 in terms of importance. 

Indeed, it was by far one of the most widely used platforms in crypto to put one’s money to work. 

Around the same time as the Celius failure, BlockFi, another very similar platform, also failed, probably with more or less the same problems. 

FTX, on the other hand, was an exchange, and it failed because customer funds were being used to pay for the absurd corporate or even personal expenses of those running it.

Marco Cavicchioli
Marco Cavicchioli
Born in 1975, Marco has been the first to talk about Bitcoin on YouTube in Italy. He founded ilBitcoin.news and the Facebook group" Bitcoin Italia (open and without scam) ".