- Celsius’s recovery plan, involving creating a new crypto services business from its bankruptcy, faces a setback due to regulatory scrutiny from the U.S. Securities and Exchange Commission (SEC).
- The SEC is requesting additional information about the assets held by Celsius, impacting negotiations with the Celsius Creditors Committee and Fahrenheit, the investment group behind the recovery plan.
- If the current plan is unfeasible, the alternative involves liquidating Celsius’s assets, highlighting the ongoing challenges and regulatory complexities in the cryptocurrency industry.
Celsius, the once-prominent cryptocurrency lender now navigating bankruptcy, faces a new hurdle in its recovery efforts, Coindesk reported, citing sources familiar with the matter. The bankrupt crypto lender’s ambitious plan to reorganize and create a new crypto services business has encountered complications with the U.S. Securities and Exchange Commission (SEC), casting uncertainty on the future of the embattled lender.
SEC demands more information on Celsius assets
The plan, which involves the formation of a new entity from the remnants of Celsius, is currently under intense scrutiny by the SEC. According to the report, there is ongoing “back and forth” regarding detailed information about the assets held by the Celsius estate. This dialogue includes the Celsius Creditors Committee and Fahrenheit, an investment consortium that emerged victorious in a bidding war earlier this year. The consortium’s proposal to issue shares in a new crypto business, leveraging Celsius’s remaining assets, is now under the microscope.
Fahrenheit, comprising Arrington Capital, U.S. Bitcoin Corp., and Proof Group, had its reorganization plan for Celsius approved by a bankruptcy court earlier this month. However, the SEC’s request for additional information indicates a careful examination of the proposed business model and asset management strategies. “The way I’m interpreting it is the SEC is telling the committee what they want to see for various parts of the business, and now the committee has to decide what they’re going to do with that information,” Coindesk cited the source as saying.
Plan B: Liquidation and distribution
The proposed plan by Fahrenheit aimed to distribute approximately $2 billion worth of Bitcoin (BTC) and Ethereum‘s Ether (ETH) to creditors. Additionally, it involved offering equity in the new company, which would operate and expand Celsius’s bitcoin mining operations, stake Ethereum, monetize other illiquid assets, and explore new business avenues. However, with the SEC’s increased scrutiny, this plan’s implementation faces potential delays or modifications.
Should this reorganization plan falter, the approved backup strategy involves the winding down and liquidation of Celsius’s assets. This contingency plan would likely result in a different financial outcome for creditors and stakeholders.
At this juncture, neither Fahrenheit nor the Celsius Creditor Committee has provided comments on the situation. Similarly, the SEC has declined to comment, maintaining its standard practice regarding ongoing investigations or deliberations.
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