Celsius Network LLC customers whose assets have been trapped on the failed crypto lender’s platform questioned the firm’s acting chief executive officer about fluctuations in the company’s native token and its plans to partially repay creditors with stock in a new Bitcoin mining business.
(Bloomberg) — Celsius Network LLC customers whose assets have been trapped on the failed crypto lender’s platform questioned the firm’s acting chief executive officer about fluctuations in the company’s native token and its plans to partially repay creditors with stock in a new Bitcoin mining business.
Nearly a dozen customers cross-examined Celsius Interim CEO Chris Ferraro, who testified Tuesday in New York bankruptcy court in support of the company’s plan to partially repay creditors and resolve its Chapter 11 case. The hearing gave customers a chance to probe Ferraro, who has guided Celsius through bankruptcy, while their assets remain in limbo.
Ferraro, who took over as Celsius’ acting CEO following the resignation of Alex Mashinsky, said his primary goal is to distribute roughly $2 billion in Bitcoin and Ethereum to creditors and transfer the reformulated business to a new management team led by Arrington Capital. Customers on Tuesday also questioned Steven Kokinos, who is expected to become the new company’s CEO.
The new creditor-owned firm slated to emerge from Celsius’ bankruptcy has a strong chance at succeeding because it will be staked with $450 million in crypto, carry no debt and run a robust Bitcoin mining operation, Ferraro said.
“This should be a company that has a great future,” Ferraro said while testifying in a Manhattan courtroom.
Gray Area
Celsius’s plan must be approved by a bankruptcy judge and cleared by federal securities regulators who have cracked down on the crypto industry over the last year. The plan also provides legal protections for advisers who will be distributing crypto to creditors, which Ferraro said is important because of the regulatory gray area the industry inhabits in the US.
Celsius customer Sharon Dow interrogated Ferraro on the new mining company’s computational power and how it will operate in a competitive industry. Ferraro said mining rigs can be turned on or off depending upon the price of electricity and crypto, generating the most revenue when the market is favorable and reducing costs when its not.
Customers also asked about the price of the failed crypto lender’s native token, CEL, after the firm paused withdrawals in June 2022. They asked why Celsius’ bankruptcy plan values CEL at just 25 cents and not higher prices the token traded at before the company filed bankruptcy. The CEL value will help determine how much customers will be repaid under the plan.
Ferraro testified that CEL prices were manipulated before bankruptcy and that the higher prices didn’t reflect the token’s actual value, which he said was tied to the value of Celsius as a business. Federal prosecutors have accused Mashinsky and other former Celsius executives of manipulating CEL and making misleading statements to Celsius customers. Mashinsky has pleaded not guilty to criminal charges.
Judge Martin Glenn, who is overseeing Celsius’ bankruptcy, is considering whether to approve the company’s Chapter 11 plan. The proposal from a key committee representing Celsius customers and other stakeholders.
The bankruptcy is Celsius Network LLC, 22-10964, US Bankruptcy Court for the Southern District of New York (Manhattan).
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