The United States Bankruptcy Court for the Southern District of New York has granted permission for Celsius debtors to exchange their altcoins for Bitcoin and Ether, effective immediately. This decision, issued by bankruptcy judge Martin Glenn on June 30th, not only facilitates the distribution of funds to creditors in the near future but also aligns with discussions between Celsius and the US Securities and Exchange Commission (SEC). It is important to note that the order does not permit the sale or trade of tokens associated with Withhold or Custody accounts.
Celsius Bankruptcy and Acquisition
Celsius, a crypto lending platform, filed for bankruptcy following the collapse of Terra on July 13, 2022, revealing liabilities totaling $10 billion. However, in a bid to revive the platform, crypto consortium Fahrenheit acquired Celsius on May 25, 2023. Fahrenheit has expressed its intention to develop a revised bankruptcy plan for Celsius Network, although specific details regarding these plans have not yet been disclosed.
Exclusive Distribution of Assets
The recent ruling emphasizes that the owners of Celsius will exclusively distribute the assets in the form of Bitcoin and Ether. As part of the acquisition, Fahrenheit secured Celsius Network’s institutional loan portfolio, staked cryptocurrencies, mining unit, and other investments. According to the ruling, the new company is expected to receive between $450 million and $500 million in liquid cryptocurrencies.
SEC Crackdown and Altcoin Conversion
The decision to allow Celsius Network’s debtors to convert altcoins to Bitcoin and Ether comes at a time when the US SEC is intensifying its scrutiny of crypto exchanges and altcoins. The regulatory authority has already classified over 160 cryptocurrencies as securities, including Cardano, Polygon, and Solana. Consequently, many crypto companies have opted to convert their altcoin holdings into Bitcoin and Ether.
By permitting the trading of altcoins for Bitcoin and Ether, the United States Bankruptcy Court for the Southern District of New York has taken a significant step in ensuring the efficient distribution of funds to Celsius Network’s creditors. This decision aligns with ongoing discussions between Celsius and the US SEC and reflects the increasing trend among crypto companies to convert altcoins into more established cryptocurrencies. As Celsius continues to navigate its bankruptcy proceedings, the exclusive distribution of assets in Bitcoin and Ether offers a potential path towards stability and recovery.