Citing extreme market conditions, Celsius froze withdrawals in June in a move that reverberated through the crypto world and beyond
, spurring a $300-billion selloff in digital assets and leaving legions of retail investors cut off from their savings.
With scant precedent for bankruptcies at large crypto companies, the prospect of multiple lawsuits against Celsius, as well as the high complexity of any restructuring, the Chapter 11 process is likely to be slow, the lawyers said. When crypto markets slumped this year as surging inflation rates sparked a flight to safer assets and two major tokens – terraUSD and luna – failed, the riskier bets by lenders on wholesale crypto markets turned soured.
Creditor committees formed as part of bankruptcy proceedings will likely seek to shape any reorganization plan decided by Celsius, three lawyers said. Creditors can also make claims against the company even as it goes through the process. “ have no earmarked rights to any funds or anything, everything’s been commingled,” Van Horn said. “Sometimes it’s a very small amount that unsecured creditors get.”As of July 13, it had some 23,000 outstanding loans to retail borrowers worth $411-million, backed by crypto collateral worth $766-million, it said in a filing on Thursday.
“I think we’re going to be last on the list,” he said of any repayments from the bankruptcy. “I don’t know how to afford rent or car payments, especially with the other debts that I have.”
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