Bankrupt crypto lender Celsius announced that it had submitted a motion to a U.S. court asking for more time to develop a reorganization plan. After freezing billions of dollars in customer funds in June, the company is currently going through bankruptcy proceedings.
In July, about a month after it stopped allowing customer withdrawals, the troubled crypto lender filed for Chapter 11 bankruptcy in the Bankruptcy Court of the Southern District of New York.
Chapter 11 bankruptcy allows a company to continue operations while meeting its obligations to indebted parties. This is usually executed by proposing a plan of reorganization to be approved by creditors and overseen by a legal team.
The initial filing initiated a four-month “period of exclusivity” giving the company the opportunity to develop a reorganization plan that outlines how it will pay off its obligations. All creditors’ attempts to file legal lawsuits are suspended in the meantime. The firm reported that it owes more than $5.5 billion.
Celsius “period of exclusivity”
As the duration of the exclusivity period is about to expire, Celsius has requested an extension. The court has the authority to shorten or lengthen the exclusivity period.
The reorganization must be proposed independently by the firm, and it must also contain procedures for the sale of its assets. Because the job is “intensive,” according to Celsius, more time is needed to finish the reorganization plan.
Although this vital task is complex, Celsius added,
“We are making significant progress toward the determination of a value-maximizing way forward. However, it is critical for us to be as rigorous and comprehensive as possible in the interest of all stakeholders.”
Celsius is one of many cryptocurrency companies experiencing insolvency during a severe market slump; the most recent being the FTX exchange and its sister company Alameda Research. Numerous other cryptocurrency businesses, such as Three Arrows Capital, Voyager, Vauld, Zipmex, and Babel Finance, are also having significant financial woes.
