March 24, 2023

Will the Celsius company be able to get out of its setbacks? While the company has been under chapter 11 of the United States bankruptcy law since July 2022, its managers are looking for viable solutions to repay their creditors. One of the proposed solutions is the creation of a new token.

Why does Celsius consider creating a token?

Celsius, which has been bankrupt for nearly six months, has just revealed its intention to create a new token to reimburse its creditors. At the same time, a restructuring of the company is planned to put an end to its bankruptcy, and thus relaunch its activities as a regulated platform.

According to Celsius lawyer Ross M. Kwasteniet, this reorganization of Celsius can be done through a public offering. This operation could allow Celsius to raise more money than the liquidation of its assets, and thus reduce its debts as much as possible.

Indeed, Celsius blocked its clients’ funds on June 13, 2022, when Bitcoin price (BTC) stood at $27,000. Today around 22,500 dollars per unit, the queen of cryptocurrencies has suffered a fall of 17% over the last 6 months, consequently impacting the rest of the market and the value of the company’s assets under management.

As part of the repayment plan, attorney Kwasteniet told U.S. bankruptcy judge Martin Glenn that negotiations have taken place between Celsius and its creditors regarding the rollout of this new token. These same creditors will be called upon to vote for or against the repayment planthe result of which will be taken into account by the judge to make his final decision on this case.

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An unconvincing financial strategy

While the company will file court documents this week about its restructuring, investors are questioning the real effectiveness of his maneuvers. Indeed, Celsius has multiplied pessimistic announcements to investors in recent months:

  • extinction of its 37,000 mining machines;
  • distribution of a document publicly listing the personal assets of its clients;
  • publication of a legal document claiming that the assets of investors deposited in the Earn product, worth $4.2 billion when the funds were blocked, are under the property of Celsius;
  • revelation of a $10 million withdrawal made by the Celsius founder a few weeks before the platform’s withdrawals closed.

Additionally, according to the Vermont State Department of Financial Regulation, the company allegedly lied to its customers many times : while Alex Mashinsky, the platform’s founder and former CEO, repeatedly asserted on Twitter that he was doing well with Celsius’s accounts, it turns out that the company had been insolvent since 2019.

Currently, Celsius’ economic future is as uncertain as the reimbursement of its customers. Between this bankruptcy and that of FTX, investor confidence has drastically eroded in custodial wallet solutions. Consequently, the big winners in this bear market are the sellers of cold wallets, whose sales have been propelled to all-time highs.

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Source : Bloomberg

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