Over 98% of the creditor groups of Celsius Network have given the green light for the proposed reorganization plan.
As per the plan, the creditors of the bankrupt crypto lender would be able to recover between 67% and 85% of their investments.
Moreover, Stretto, a restructuring agency, filed a voting declaration on September 25th, which revealed that the creditors would also be granted equity in a newly formed organization named ‘NewCo’.
The reorganization plan
The U.S. Trustee is the entity backed by the Department of Justice (DOJ) that oversees the administration of bankruptcy cases and the private trustees that are part of them.
It had objected to the reorganization plan that had been proposed by the crypto lender. The US Bankruptcy Court in the Southern District of New York will have to give final approval for implementing the plan.
The hearing for this purpose is scheduled to take place on October 2nd. Documents disclosed on August 17th highlighted the proposed plan.
It dictates that Ethereum and Bitcoin worth $2 billion would be distributed amongst the creditors of the now-defunct crypto lender.
As far as the new entity is concerned, it will be a platform that manages the existing Bitcoin mining operations of Celsius Network.
Plus, it would also liquidate the other assets that belong to debtors who are part of the bankruptcy case and hold stakes in Ether.
Most importantly, it would comply with regulatory requirements while exploring new business opportunities.
Individuals belonging to the Fahrenheit Group will be part of the management team that will oversee the operations of NewCo.
In May 2023, Fahrenheit Group managed to win the bid for acquiring the bankrupt crypto lending platform.
It is backed by venture capitalists Proof Group Capital Management and Arrington Capital, bitcoin mining firm US Bitcoin Corp, and the former Algorand CEO, Steven Kokinos.
Fahrenheit Group would also provide the new public entity with the necessary technology, management team, and capital required for establishing and operating it.
It would also be responsible for ensuring compliance with all important and relevant regulations.
There was a time when Celsius had had a very prominent position in the crypto market. As of October 2021, its assets under management had been a whopping $25 billion.
Users had deposited different digital assets on the platform for earning interest and had used their cryptocurrencies as collateral for taking out loans.
Last year, the downturn in the crypto market drove Celsius to file for bankruptcy and Alex Mashinsky, its former CEO, was arrested this year in July, a year after the company’s downfall.
The approval from creditors is a major step forward in the firm’s bankruptcy proceedings and could result in an equitable resolution benefiting all stakeholders.
But, the news of creditors approving the restructuring plan comes at a time when the US Securities and Exchange Commission (SEC) has made an objection to the plan of the bankrupt company.
The securities regulator has objected to the role of Coinbase as a distribution agent, the crypto exchange, for international clients.