Customers Of Celsius May Have To Wait Years For A Payout

Due to the absence of legal precedent, ongoing litigation, and Chapter 11 bankruptcy’s complexity, Celsius users may have to wait a long time to have their deposits back.

According to attorneys commenting on Celsius’s recent bankruptcy case, users may have to go through a protracted process in order to get their money back.

“Customers should now buckle up for a bumpy ride as they await some clarity over the fate of their money.”

On June 12, Celsius declared a halt to transfers, swaps, and withdrawals due to “extreme market conditions.” In the devastating market sell-off brought on by the Terra affair, there were reports circulating weeks prior to the revelation that the company was having financial problems.

Recent substantial loan pay downs gave hope that the company was trying to stay afloat. Between July 2 and July 4, the Twitter account @BTCKYLE revealed Celsius had paid down $270 million against its DeFi stakes in total, raising hopes that business as usual would soon resume.

There was some hope that business would resume as usual on July 14, but that dream was dashed when the company filed for Chapter 11 bankruptcy. Known as a “reorganization,” this sort of bankruptcy enables the company to continue operating while restructures its debt obligations.

According to Celsius, the goal of the move was to stabilize business operations and provide the best way to “emerge… for success in the crypto industry.” It further stated that it declared bankruptcy for the benefit of all parties, including customers.

The process will probably take a while, according to bankruptcy attorneys, because there is “scant precedent” for significant crypto corporations filing Chapter 11, there are ongoing lawsuits against the company, and filing for Chapter 11 is complicated.

James Van Horn, a partner at the legal firm Barnes & Thornburg, commented on the predicament Celsius was in:

“It is, at best, unknown how the bankruptcy code and bankruptcy courts will be treating cryptocurrency companies.”

Stephen Gannon, a partner at Davis Wright Tremaine, described the procedure as “three-dimensional chess” and estimated that it would take at least six months to draft a reorganization strategy.

In general, secured creditors, unsecured creditors, and equity holders are given priority in bankruptcy proceedings.

According to a document that was filed along with the bankruptcy petition, the corporation had $5.5 billion in obligations as of July 14 and $5.5 billion in assets, leaving a $1.2 billion gap.

DISCLAIMER: The Information on this website is provided as general market commentary and does not constitute investment advice. We encourage you to do your own research before investing.

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