- Due to lower-than-expected returns from the bankrupt lender’s estate, Celsius Loan creditors are actively considering pursuing an appeal of Celsius’ reorganization plan.
- The collection of creditors is discussing the possibility of pursuing an appeal based on two main claims with a number of attorneys.
According to people familiar with the situation who spoke with The Block, cryptocurrency traders are looking into legal challenges to Celsius’ reorganization plan because they feel the accord unfairly favors some creditors over others. They contend that consumers with Loan accounts that include debts from the lender’s estate have seen considerably less recovery under the current plan.
Creditors who borrowed from Celsius are talking with “several” lawyers to see if they can fight the reorganization plan. The same source, a Loan creditor, claims that the creditors seek to get back some of the money they put up as security on the now-closed platform.
According to Weil Restructuring, the Bankruptcy Code has deadlines that restrict when an appeal can be filed, so it’s uncertain whether Loan users will be allowed to do so.
According to the federal rules of bankruptcy proceedings, an appeal must typically be filed “14 days after the entry of the judgment, order, or decree being appealed.” The plan might be amended with the court’s approval, however, this would probably involve a difficult procedure.
Celsius Loan creditors state they are still in the early stages of considering their options and do not yet have a deadline for launching a prospective legal challenge. The Block was informed by a source that the group will fund any upcoming legal action taken by the lender’s principal Loan creditors.
Two significant concerns for bankruptcy courts and associated stakeholders have been raised by creditors’ attempts to challenge the manner in which their claims are being processed and the recent increase in the value of digital assets: How much is the bitcoin owned by creditors really worth, and how should those assets be returned?
Chief Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York accepted Celsius’ restructuring plan last November, over a year after the lender declared bankruptcy in July 2022.
However, the implementation of this technique resulted in smaller-than-expected repayments for Celsius Loan clients; multiple creditors said they were paid less than thirty percent of what they believed they were entitled to.
A person with knowledge of the situation alleges that holders of Celsius Loan accounts wish to file an appeal on the basis of two primary grounds.
According to the first claim, the court did not provide “fair and equal” treatment for the clients of Celsius Loan, a collateralized cryptocurrency loan service, and users of Celsius Earn, an interest-bearing crypto account. The Block was informed by a creditor that Earn creditors’ claims were handled this year a few weeks ahead of Loan customers’, which increased recoveries for consumers of the business’s main interest-bearing product.
The second claim contests an order dated December 27, 2023, which stipulates that $225 million from the lender’s bankruptcy estate must be used to fund Celsius’ new mining company. One creditor pointed out that certain loan creditors contend that this money ought to have been used to improve creditors’ recovery.
Celsius’ lawyers had not responded to The Block’s request for comment at the time of reporting. However, it should be emphasized that a number of elements are involved in the assessment and payment of a bankruptcy claim, which makes comparing the recovery of creditors more difficult.
Disclaimer : This article was created for informational purposes only and should not be taken as investment advice. An asset’s past performance does not predict its future returns. Before making an investment, please conduct your own research, as digital assets like cryptocurrencies are highly risky and volatile financial instruments.
