By Ian Allison

A motion filed by lawyers says the Celsius bankruptcy is “all about the customers” and “without regard for the equity holders.”

Holders of preferred equity in failed cryptocurrency lender Celsius Network want to make sure they’re at the table in talks on clawing back their investments, as well as first dibs on proceeds from the sale of certain assets, saying they are worried the bankruptcy process is overly focused on retail customers.

Law firm Milbank LLP 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 to place them at the front of the queue when it comes to 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 the customers, without regard for the Equity Holders, but the Debtors also have made it abundantly clear that the UCC is their partner, and these cases are all about the customer,” the statement said.

The lawyers said a fiduciary is needed to take the equity holders’ side of the dispute before a plan of reorganization is proposed that “violates the Bankruptcy Code.”

The action on the part of the shareholders, who poured some $750 million in Series B funding into the company just months before it sank into bankruptcy, creates another faction of claimants.

In a move that will further divide the Celsius case, the motion also requests that the court caps claims at the U.S. dollar value as of the date of the bankruptcy petition date. Effectively, this means that if cryptocurrency prices increase over the course of the proceedings, the upside goes to the equity holders and not the customers. If crypto goes down, however, customers take a hit.

“This is a total bombshell likely to alienate the entire creditor body and constituencies,” Thomas Braziel, founder of bankruptcy investment specialist 507 Capital, said in an interview. “It is potentially leading to World War III in the Celsius case.”

Original Article – Coindesk


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