US gov’t, creditors oppose Celsius’ proposed restructuring extension

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The United States government, a committee of creditors, and an ad hoc group of borrowers have all filed motions to oppose the Celsius Network‘s proposed extension of its restructuring deadline.

Celsius filed for Chapter 11 bankruptcy in July 2022 after the collapse of Terra’s LUNA and UST tokens exposed the Ponzi scheme founder Alex Mashinsky was running. The lender was expected to file a reorganization plan within four months but went to court to request an extension. The court extended the deadline to February 15, 2023.

However, Celsius wants much more time to get its house in order, requesting another 44 days before it files its plan. It also wants to push the period to solicit votes on the plan to June 30.

“This extension is critical to allow the debtors to reach the finish line of these Chapter 11 cases swiftly and efficiently, unobstructed by the disruption of competing plans. The debtors are well on their way to a value-maximizing conclusion to these Chapter 11 cases with the imminent filing of the plan,” the lender’s lawyers claimed in their filing.

The U.S. Trustee, the ad hoc group of borrowers, and the official committee of unsecured creditors have all opposed the deadline extension.

In his motion, Trustee William Harrington said Celsius’ case lacks the merits to request such an extended period.

“Given the rate at which professionals are consuming Debtors’ assets, a further extension through June 31 without a proper basis is inappropriate,” said Harrington, representing the U.S. Treasury.

“Notwithstanding the Debtors’ lip service to the volume of creditors, in this case, needing to be sent the plan and disclosure statement, it cites to no other case being granted such a long extension for solicitation during one motion for exclusivity.”

The ad hoc group of borrowers also filed their objection with the U.S. Bankruptcy Court for the Southern District of New York. It told the court that Celsius hasn’t demonstrated cause to extend the proposed solicitation deadline.

“This issue is of enormous concern to the Borrowers given that these cases are consuming enormous amounts of professional fees, and the outcome remains highly uncertain,” the filing noted.

‘Possibly illegal, definitely not compliant’

As CoinGeek reported recently, Celsius proposed a plan to restructure the company to a “publicly traded recovery corporation’ in court last month. As part of this restructuring, it proposed issuing an IOU token known as the Asset Share Token, which investors can sell immediately or hold for dividends.

In its motion objecting to the company’s restricting extension proposal, the official committee of unsecured creditors also objected to this reorganization plan.

“The Debtors’ liquidity is rapidly depleting, and customers have already been left without access to their accounts for too long,” the committee’s motion stated.

Aside from proposing more months to figure out its restructuring plan, Celsius is now seeking to sell off discount vouchers for ASIC maker Bitmain before they expire. This includes coupons that offer up to 30% discounts on future purchases of Bitmain’s mining rigs.

Celsius follows the lead set by Core Scientific (NASDAQ: CORZQ), which received the green light to sell Bitmain coupons worth $1 million. As per Celsius’ filing, it would raise $14 million from the sale.

While the digital asset market has seen its fair share of scams and Ponzi schemes, Celsius remains one of the biggest and most elaborate. As examiner Shoba Pillay revealed recently, the company was a Ponzi from the start, and everyone involved with it knew this.

A Slack message from former CFO Harumi Urata-Thompson early on before the collapse last year sums it all up: “…we are talking about becoming a regulated entity, and we are doing something possibly illegal and definitely not compliant.”

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