The directive issued by the court acknowledges consumers as partnerships. Through Stretto's website, affiliates, trusts, individuals, and companies can submit evidence to support their claim.
The deadline that was approved has been acknowledged by Celsius Network through a Twitter thread that was posted on November 20 and an embedded YouTube video that outlines a step-by-step guideline to assist users in submitting proof claims.
The events that led to the proceedings began on July 13, when a crypto lender based in Hoboken experienced a shortage of liquidity and subsequently filed for Chapter 11 bankruptcy. Celsius believed that obtaining the protection would allow it to continue business as usual and restructure. The cryptocurrency lender blamed the severe market conditions, which resulted in a deficit of $1.19 billion and resulted in the freezing of withdrawals and transfers for its 1.7 million customers.
Following Celsius's request on November 1 for court leave to extend the deadline by which it should submit its reorganization plan, the court in New York has granted approval to the company's request.
Inadequate Control of the Celsius Accounting System
The court was persuaded to impose the deadline after reading an independent examination report which stated that Celsius Network did not have adequate operational and accounting controls to manage customer funds. The actions of the cryptocurrency lender have been closely monitored by the regulatory bodies. Following the delivery of a ruling on November 1st, investigations were ordered into whether or not Celsius operated as a Ponzi scheme.
Customers alleged that Celsius had channeled the assets of new users to settle existing yields and withdrawals, which prompted the ruling that was issued. The request made by Celsius to have stablecoin sales and withdrawals reinstated was denied by the courts, and the next hearing is scheduled to take place on December 5.
The Potential Exposure of Crypto Users to the Current Financial Crisis
The timing of the decision to make the deadline the beginning of the year 2023 coincides with the filing for bankruptcy of another cryptocurrency platform, FTX Group. The liquidity crisis at FTX Group, which is gradually becoming a bankruptcy scandal, resurrects a familiar scenario in which investors and exchanges seek protection from losing funds from the applicable regulatory bodies.
The situation with FTX Group is very similar to that with Celsius Network; it is estimated that there are more than one million creditors. In spite of the fact that the defunct exchange has announced that it will be restructuring its global assets, bankruptcy lawyers have estimated that the process of recovering the funds will take years, and possibly even decades. In a twist of fate, Sam Bankman-Fried, who had previously served as chief executive of FTX, made an offer in October to acquire Celsius' assets.
