Celsius may issue a bankruptcy crypto token to pay creditors

CELSIUS Network is considering issuing a new digital-asset token to repay creditors as part of a proposal to reorganise and exit bankruptcy as a regulated crypto platform, the company said in court on Tuesday (Jan 24).

Reorganising Celsius into a publicly-traded company that is properly licenced would bring in more money for creditors than selling hard-to-liquidate assets at today’s depressed prices, company attorney Ross M Kwasteniet said during a video-court hearing.

Celsius has been negotiating with various creditor groups over how to set up the new company and issue a new token to creditors as part of a payout plan, Kwasteniet told US bankruptcy judge Martin Glenn, who is in New York.

Another troubled crypto platform had created digital assets to cover customer losses, but Celsius is likely the first crypto company to try to issue a new token — which must be blessed by a federal judge — to help buy its way out of bankruptcy.

A group of creditors has been pushing Celsius to follow the example set by the Bitfinex exchange, which issued new tokens to customers who lost money due to a hack. In September, a Beijing-based provider of Bitcoin mining-pool services said it would issue tokens to clients equal to the value of various crypto assets that had been frozen.

Any reorganisation plan would first go to creditors, including Celsius customers who have cryptocurrency on the company’s platform, for a vote. Glenn would take that vote into consideration before deciding whether to approve the proposal.

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After Celsius filed for bankruptcy last year, the company solicited bids for its assets and tried to sell itself as an operating business. The offers for individual assets “have not been compelling”, Kwasteniet said.

The company will file court papers with details about its plans later this week, Kwasteniet said. Any new company would be organised around assets that include a portfolio of loans and other investments, along with tens of thousands of cryptocurrency mining machines, he added.

Cryptocurrency mining has become more lucrative in recent months, a company financial adviser said during the hearing. BLOOMBERG