Celsius’ disclosure statement draws objection from U.S. trustee

By Sarah Lizee

Olympia, Wash., Aug. 7 – Celsius Network LLC’s disclosure statement for its Chapter 11 plan drew an objection from the U.S. trustee overseeing the case, according to documents filed Friday with the U.S. Bankruptcy Court for the Southern District of New York.

Region 2 U.S. trustee William K. Harrington said the disclosure statement shouldn’t be approved because it doesn’t give creditors enough information to allow them to make an informed choice as to whether to approve or reject the plan.

Specifically, the disclosure statement doesn’t contain enough information about what third-party releases are being imposed upon each class of creditor, the legal basis for the releases, whether the proposed releases are essential to confirm the plan, and what substantial contribution the non-debtors receiving releases are making, Harrington said.

“Without further clarification, the releases do not comport with Second Circuit law or the bankruptcy code, and the debtors should provide more information to explain why they do,” the U.S. trustee said.

The plan also provides an overly broad and impermissible exculpation provision, he said.

Harrington added that the disclosure statement should explain why claimants should be pressured to vote for the plan to avoid having an avoidance action filed against them.

“If holders of general custody claims vote for the plan, debtors will waive avoidance actions against them,” the U.S. trustee said.

“This is a play on an impermissible and coercive death trap designed to force general custody claim holders into acquiescing to their impaired treatment under the plan in exchange for a waiver of the possibility of an avoidance action being filed.”

The disclosure statement hearing is scheduled for Aug. 10.

The Hoboken, N.J.-based cryptocurrency lending platform filed bankruptcy on July 13, 2022 under Chapter 11 case number 22-10964.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.