The Celsius Network bankruptcy proceedings advanced with the Southern District Court in New York directing affected customers to submit their claim proofs by 5:00 pm EST on January 3, 2023.
The court directive recognizes customers as partnerships. Affiliates, trusts, individuals, and corporations file claim proof through Stretto’s website.
Celsius Network has acknowledged the approved deadline through a November 20 Twitter thread and embedded Youtube video stipulating a step-by-step guideline to assist users in filing the proof claims.
The proceedings traced to July 13, when the Hoboken-based crypto lender encountered a liquidity crunch and filed for Chapter 11 bankruptcy. Celsius considered the protection would enable it to retain operations and reorganize. The crypto lender cited harsh market conditions that led to a $1.19 billion deficit that prompted freezing withdrawals and transfers for its 1.7 million customers.
Approval granted by the New York court follows Celsius’ request on November 1 for court leave to extend the deadline it should submit its reorganization plan.
Insufficient Celsius Accounting Control
The independent examination report affirming that Celsius Network lacked sufficient operational and accounting controls to manage customer funds convinced the court to impose the deadline. Regulators have kept a watchful eye on the crypto lender’s activities. A ruling conveyed on November 1 instructed investigations on whether Celsius operated as a Ponzi scheme.
The ruling was prompted by customers alleging Celsius channeled the assets of new users to settle existing yields and withdrawals. With the next hearing date scheduled on December 5, the courts declined Celsius request to restore stablecoin sales and withdrawals.
Crypto Users’ Vulnerability to Bankruptcy Crisis
The decision to set a deadline at the onset of 2023 coincides with another crypto platform – FTX Group- plunging into bankruptcy. The FTX Group liquidity crisis that is gradually becoming a bankruptcy scandal reincarnates a familiar scenario of investors and exchanges seeking regulators protection from losing funds.
The FTX Group case replicates the Celsius Network scenario with creditors speculated to exceed 1 million. Although the defunct exchange declared reorganizing its global assets, bankruptcy lawyers have estimated the funds’ recovery process to last years, potentially decades. Ironically, former FTX chief executive – Sam Bankman-Fried offered to acquire Celsius’ assets in October.
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