Lawyers say in a motion that the bankruptcy of Celsius is “all about the customers” and “without regard for the equity holders.”
Holders of preferred equity in the failed cryptocurrency lender Celsius Network want to make sure they are at the table when decisions are made about getting their investments back and getting the first crack at the money from the sale of certain assets. They say they are worried that the bankruptcy process is too focused on retail customers.
Milbank LLP, a law firm, filed a motion in the bankruptcy court for the Southern District of New York to appoint a Preferred Equity Committee to represent Series A and Series B shareholders and put them at the front of the line for the sale of custody firm GK8 and the Celsius mining operations.
“Not only is the UCC (Unsecured Creditors Committee) laser-focused on maximizing value for customers, regardless of Equity Holders, but the Debtors have also made it very clear that the UCC is their partner and that these cases are all about the customer,” the statement said.
The lawyers said that a fiduciary needs to take the side of the equity holders before a plan of reorganization that “violates the Bankruptcy Code” is put forward.
The action of the shareholders, who gave the company $750 million in Series B funding just months before it went bankrupt, makes a new group of claimants.
In a move that will make the Celsius case even more complicated, the motion also asks the court to limit claims to their value in U.S. dollars as of the date the bankruptcy petition was filed. This means that if the price of a cryptocurrency goes up during the proceedings, the money goes to the people who own shares, not to the customers. But if crypto goes down, customers will lose.
In an interview, Thomas Braziel, the founder of 507 Capital, a company that specializes in bankruptcy investments, said, “This is a total bombshell that is likely to anger all creditors and groups.” “In the Celsius case, it could bring about World War III.”
