Though most crypto investors have good reason to be optimistic this week, Celsius creditors may be in for a bad deal if digital asset prices continue to climb.
The bankrupt crypto lending firm may soon be able to pay its cash-based debts simply by liquidating its newly profitable Bitcoin (BTC) and Ethereum (ETH) holdings alone. That would mean the bankruptcy gets away with more assets, while its counterparties are repaid at a far more difficult time to enter the crypto market.
The Celsius Dilemma
According to @CelsiusNewCo on X – an account managed by multiple Celsius creditors – the firm will be able to “rug pull all creditors” if BTC reaches $54,879 per coin, and if ETH reaches $3,750.
The account cited a thread from Simon Dixon – CEO of BankToTheFuture, a major Celsius investor – posted in July, using numbers calculated by his firm. The estimates were based on a 50/50 liquidation basis for each coin.
“It is very important that we get out of Chapter 11 before Bitcoin & ETH approach these numbers to avoid another rug pull that we will need to fight hard against if it comes up,” he said at the time.
Celsius filed for bankruptcy in June of last year after collapsing crypto market prices forced the firm to freeze user withdrawals. A later look at the company’s balance sheet revealed it was $1.2 billion in debt.
Last month, the company gained court approval for its bankruptcy restructuring plan, which involved transitioning into a Bitcoin mining/staking entity owned by NewCo creditors. It also involves distributing $2 billion worth of BTC and ETH to its customers – the two coins that Celsius began consolidating its digital assets into in June.
What’s the Best Outcome?
If BTC and ETH keep rising, the bankruptcy can repay all of its USD claims while retaining all other assets, per Dixon’s July thread.
Customers held mixed feelings about such an outcome when discussing the matter on Tuesday. While some were dissatisfied about not receiving their owed crypto payouts, others were willing to settle for any immediate solution after 18 months of waiting.
“I wish they’d do it just so I can move on with my fucking life,” said @jboinvest on X.
Bitcoin tapped a new yearly high at $44,000 on Tuesday. That’s up 16% in the last 7 days and 117% from when Celsius filed for bankruptcy on July 12, 2022.
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