Crypto lender Celsius Network may be required to seek a new creditor vote on its proposed transition into a Bitcoin (BTC) mining business, according to a Reuters report.
Celsius Network Faces Potential Pushback
Last week, Celsius Network announced its decision to streamline its post-bankruptcy operations solely focused on Bitcoin mining. This shift was prompted by the SEC’s skepticism surrounding Celsius Network’s other planned business lines.
Although the SEC did not formally object to Celsius Network’s previous bankruptcy plan, the agency expressed reservations about crypto lending and staking activities, which it has previously opposed.
Judge Glenn voiced his concerns during the hearing, highlighting that the proposed transformation deviates from the deal initially approved by creditors. Glenn further emphasized that Celsius Network needed to address SEC concerns and expressed his frustration, stating he had been a “broken record” about the importance of reaching an agreement with the regulatory body. According to Judge Glenn, the revised deal could face significant opposition from creditors.
During the hearing, Celsius Network’s attorney, Chris Koenig, argued that the court-approved bankruptcy plan granted the company the flexibility to pivot to a mining-only business.
Koenig stated that a new creditor vote was not necessary as the new deal would be equally beneficial for creditors. The revised plan allows Celsius Network to free up $225 million in cryptocurrency assets that would have been managed by a consortium of outside investors, known as Fahrenheit, under the previous bankruptcy plan.
The new proposal offers creditors a 67% recovery, an increase from the 61.2% recovery under the Fahrenheit deal.
Opposition From Unrepresented Customers Seeking Full Liquidation
Per the report, under the revised plan, the post-bankruptcy mining business of Celsius Network will be overseen by US Bitcoin Corp, chosen over the Blockchain Recovery Investment Consortium (BRIC) as a backup bidder after a concluded auction.
Celsius attorney Koenig defended the decision, deeming the BRIC deal as “stale” and citing US Bitcoin’s more recent involvement with the Fahrenheit bid. An attorney representing BRIC argued that Celsius Network should have honored the backup bid agreement instead of pursuing a new deal.
Two customers, representing themselves without legal representation, expressed opposition to the deal in court papers filed on Wednesday. They argued that Celsius Network should be fully liquidated instead.
The crypto lender’s proposed transformation into a Bitcoin mining business faces potential hurdles as a US bankruptcy judge suggests a new creditor vote may be required.
The revised plan offers increased recovery for creditors, but it remains to be seen if it will gain sufficient support. The outcome of this ongoing legal battle will significantly impact the company’s future operations and the broader cryptocurrency lending industry.
At present, the native token of the company, CEL, is trading at $0.2475. The token has experienced significant price increases of 6.7% over the past seven days and 3.9% over the past fourteen days.
Featured image from Shutterstock, chart from TradingView.com
