Since the company filed for bankruptcy, speculation about the future of retail investments has been rife on social networks. Celsius has just published its strategy for continuing to survive financially despite the bankruptcy proceedings initiated in New York.
As a reminder, the last few months have been a rollercoaster ride for the company. Indeed, while it was securing a fundraising of more than $600 million last autumn, Celsius had to prevent withdrawals and transfers from its platform following the crash of the Luna ecosystem in early June.
The document shared by the company is indicative of the deep legal complexity of the situation. In it, the company wishes to share with users the key points to which they must respond quickly, as their first hearing following the bankruptcy proceedings takes place on Monday 18 July.
A brief overview of the legal issues discussed within the company
Celsius’ financial difficulties are also linked to the recent decline in the crypto-currency market. Many crypto currencies have lost more than 70% of their value since the beginning of 2022. The company still needs to find a way to pay back users.
However, the company is currently questioning how it is supposed to pay back a crypto claim when it has lost so much value in such a short time. Moreover, the date by which the total amount to be repaid is to be determined also poses a great difficulty for the company’s legal department.
This last issue is crucial, as users will want to get as much money back as possible once withdrawals are allowed. According to Celsius, since 30 March 2022, the market value of their assets has fallen by $12.3 billion.
All of these issues, and many others, will be at the heart of the various court appearances that the company’s founders will have to make in the coming months. The recruitment of legal and financial experts should also make their task easier, but the latter is obviously likely to be difficult.
Celsius designs a proactive strategy to reassure platform users
As announced in its press release indicating the initiation of the company’s bankruptcy proceedings, Celsius wishes to ensure the integrity of its structure by following a phased strategy. First, it assures users that key steps have been taken prior to the commencement of the proceedings to safeguard and preserve the assets and return them to the custody of Celsius.
In addition, it states that it has unwound the majority of its third party borrowing and security deposit positions. As a result, almost all of Celsius’ assets are stored in secure vaults at Fireblocs, which allows Celsius to hold the private keys to its crypto-currencies.
These various measures were taken to address the various issues mentioned above and to avoid the court having to impose further guidelines on them. Nevertheless, the company cannot be assured that it has done all the right things and the future decisions of the judge will obviously be closely scrutinised by the community.
What are the next steps for Celsius following the bankruptcy?
Although the company has been forced to close its mining business, it says that much of its Bitcoin mining equipment is still functional. In fact, it wants to use the Bitcoins from this activity to reimburse some of its customers in the future.
Finally, among the various measures proposed, Celsius wants to offer a choice to its users. They will be able to choose to get all or part of their liquidity back at a reduced price or keep their investment on the platform and hope for better days to come.
The next few weeks are likely to be turbulent for Celsius as it owes $4.7 billion to all of its users, but as they wait to find out more, they are already faced with an impossible dilemma.