Celsius gets approval of amended disclosure statement, settlement

By Sarah Lizee

Olympia, Wash., Aug. 15 – Celsius Network LLC received approval of the amended disclosure statement for its Chapter 11 plan from the U.S. Bankruptcy Court for the Southern District of New York, according to court documents filed Monday.

The plan distributes the value of the debtors’ estates primarily between Earn and Borrow account holders and returns assets to Custody account holders based on settlements reached with each group.

Celsius will distribute about $2 billion of Bitcoin and Ethereum to creditors, as well as equity in a new company (NewCo) to creditors.

NewCo will operate and build out the debtors’ Bitcoin mining operations, stake Ethereum, monetize other illiquid assets and develop new business opportunities.

It will be managed by Fahrenheit, LLC, a group consisting of US Bitcoin Corp., Arrington Capital, Proof Group, Steven Kokinos and Ravi Kaza.

NewCo will exit Chapter 11 with no funded debt. Fahrenheit intends to list the common stock of the new company on the Nasdaq on or shortly after the plan’s effective date.

The official committee of unsecured creditors said in court documents that this will provide creditors who wish to sell their shares in the new company with the ability to do so at the best possible price.

The plan also includes a backup option, through which Celsius and the committee may pivot to an orderly wind down in case of complications or delays in implementing the NewCo transaction.

The orderly wind down would provide recoveries to creditors by creating a standalone Bitcoin mining company and distributing the equity of that business to creditors, distributing available liquid cryptocurrency, and creating a trust vehicle to monetize the debtors’ remaining illiquid assets and distribute the proceeds of the assets to creditors over time.

Celsius said the value distributed through a wind down will likely be materially less than under the NewCo transaction.

The estimated recovery under the plan, based on either scenario, is as follows:

• For retail borrower deposit claims, 85.6% under the NewCo transaction, and 83% under the wind down;

• For convenience claims, 70% under the NewCo transaction, and 70% under the wind down;

• For general Earn claims, 67% under the NewCo transaction, and 61.2% under the wind down;

• For withheld claims, 72% under the NewCo transaction, and 67.1% under the wind down;

• For unsecured loan claims, 67% under the NewCo transaction, and 61.2% under the wind down; and

• For general unsecured claims, 67% under the NewCo transaction, and 61.2% under the wind down.

The above estimated recoveries don’t account for additional sources of value that may be available under the NewCo transaction, including any increase in the equity value of NewCo represented in the value of NewCo common stock, and recoveries on account of litigation claims that will be pursued by a fiduciary for the benefit of account holders and other unsecured creditors.

The plan also provides eligible account holders that vote to accept the plan with the choice to elect to receive more liquid cryptocurrency and less NewCo equity, or vice versa.

Those electing to receive more liquid cryptocurrency will forgo all or a portion of their NewCo equity distribution at a 30% discount to the liquid cryptocurrency they are receiving, and those electing to receive more NewCo equity will receive that equity at a 30% premium to the liquid cryptocurrency amount that is being forfeited.

Committee settlement

The court also approved a settlement with the committee that aims to resolve more than 30,000 claims totaling over $78 billion against the debtors.

The committee had sought and received authority from the bankruptcy court to file a class action claim on behalf of all account holders, asserting claims of fraud, misrepresentation and violation of various consumer protection statutes against each debtor entity.

The committee has agreed to settle its class claim with the debtors in exchange for a 5% increase in the scheduled amount of all account holder claims, other than Custody claims.

Any account holder can opt out of the settlement and elect to pursue their own claim against the debtors by electing to opt out on their ballot.

An account holder that opts out will not receive the 5% increase to their scheduled claim amount, will have to prove their claim and damages on account of that claim, and will not receive a distribution from the debtors until their disputed claim is resolved.

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

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