Celsius discloses plan voting results; U.S. trustee files objection

By Sarah Lizee

Olympia, Wash., Sept. 26 – Celsius Network LLC gave the voting results for its Chapter 11 plan in a tabulation summary filed Monday with the U.S. Bankruptcy Court for the Southern District of New York.

The voting results are as follows:

• 4,215 holders, or 98.83% in number, of $220.58 million, or 96.33% in amount, of class 2 retail borrower deposit claims voted to accept the plan, while 50 holders, or 1.17% in number, of $8.41 million, or 3.67% in amount, voted to reject the plan;

• 38,248 holders, or 98.25% in number, of $59.27 million, or 98.69% in amount, of class 4 convenience claims voted to accept the plan, while 681, or 1.75% in number, of $784,185.09, or 1.31% in amount, voted to reject the plan;

• 38,734 holders, or 99.35% in number, of $2.42 billion, or 99.28% in amount, of class 5 general Earn claims voted to accept the plan, while 254 holders, or 0.65% in number, of $17.5 million, or 0.72% in amount, voted to reject the plan;

• 5,869 holders, or 99.5% in number, of $139.83 million, or 98.78% in amount, of class 6A general Custody claims voted or were deemed to have voted in favor of the plan, while 29 holders, or 0.5% in number, of $1.72 million, or 1.22% in amount, voted to reject the plan;

• 654 holders, or 98.79% in number, of $5.39 million, or 82.56% in amount, of class 7 withhold claims voted to accept the plan, while eight holders, or 1.21% in number, or $1.14 million, or 17.44% in amount, voted to reject the plan;

• Two holders of 100% of $82.78 million of class 8 unsecured loan claims voted to reject the plan;

• 20 holders, or 74.07% in number, of $6.38 million, or 99.56% in amount, of class 9 general unsecured claims against the consolidated debtors voted to accept the plan, while seven holders, or 25.93% in number, of $28,436.05, or 0.44% in amount, voted to reject the plan;

• One holder, or 50% in number, of $140,000, or $2.58% in amount, of class 9 general unsecured claims against Celsius Mining LLC voted to accept the plan, while one holder, or 50% in number, of $5.28 million, or 97.42% in amount, voted to reject the plan;

• One holder of $3,325.00 of class 9 general unsecured claims against Celsius Network Inc. voted to reject the plan;

• One holder of $29.84 million of class 10 state regulatory claims voted to accept the plan; and

• Seven holders, or 98.34% in number, of 29,585 shares, or 98.34% in amount, of class 14 series B preferred interests voted to accept the plan, while one holder, or 12.5% in number, of 500 shares, or 1.66% in amount, voted to reject the plan.

The confirmation hearing is scheduled for Oct. 2.

U.S. trustee objection

Region 2 U.S. trustee William K. Harrington filed an objection to the plan on Monday, reiterating concerns found in his first objection to the plan in August.

Harrington said that since filing the first objection, he has made several requests and revision recommendations to the debtors, but the plan continues to include release and exculpation provisions that are over broad and contain prospective parties and activities.

Plan terms

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 do not 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 company also recently reached 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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