What was discussed at Celsius's first day of bankruptcy hearing?
Original source: The Block
Author: Aislinn Keely
Original compilation: PANews
Original compilation: PANews
Crypto lending service provider Celsius has initiated bankruptcy proceedings in accordance with the requirements of Chapter 11 of the US Bankruptcy Code, but the company's lawyers applied for a provisional motion on the first day of litigation to ensure that they can continue to maintain business operations. (Motion: A formal proposal by a member of a deliberative body recommending a certain action)
Judge Martin Glenn, who presided over the case, seemed satisfied with most of Celsius' requests, but the Department of Justice's Office of the US Trustee made it clear that Celsius must provide more transparency in the future — No doubt this was also upheld by Justice Martin Glenn.
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Celsius asks court not to disclose employee information to avoid personal risk
On the first day of the Celsius bankruptcy case, nearly 200 people participated in the Zoom hearing. The content of the case is actually not complicated. Patrick Nash, restructuring partner at Kirkland & Ellis, re-appealed at the hearing, examining the main causes of Celsius' bankruptcy and collapse of funds.
Patrick Nash claimed that Celsius was glad to have the opportunity to communicate with everyone about future plans, because legal people had previously advised them not to communicate too much with the community before filing for bankruptcy. In fact, since Celsius stopped withdrawals a month ago due to liquidity issues, the company has remained silent, having barely communicated with the crypto community about its future plans before filing to initiate bankruptcy proceedings last week.
Celsius plans to create a committee of creditors for the U.S. trustee, essentially a "client committee" that could advise Celsius on restructuring, with "community support essential," in Patrick Nash's words. But the problem is that Celsius’s approach has also encountered some strong opposition, especially from its employees and affiliated companies. Due to the large amount of hate speech (even death threats) on social media, this issue has affected their safety. . For this reason, Patrick Nash recommends that key information such as the identity of relevant employees and affiliated companies not be disclosed in the court's public documents. Judge Martin Glenn has granted Celsius' interim motion, but said the court will reconsider the issue throughout the proceedings because it is unclear whether the information can be kept confidential under applicable statutes.
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Allow Celsius to continue to maintain crypto assets and pay employees
At the trial hearing stage, Sarah Cornell, a trial attorney for the Office of the Trustee of the U.S. Department of Justice, said that Celsius had many transparency problems found in the regulatory investigation. In fact, there are almost no documents submitted by Celsius to securities regulators provide any information.
Although there was no particular focus on transparency issues during the first day of proceedings, nor did it affect Judge Martin Glenn's judgment on the Celsius motion, both Judge Martin Glenn and attorney Sarah Cornell raised concerns about Celsius' legal compliance. (However, Celsius believes that regulators have not given regulatory clarity so far).
Attorney Sarah Cornell has also filed a number of motions pushing Celsius to further improve transparency, including a Celsius cash management motion, which mainly includes:
1. Provide Celsius with US$300,000 in funds for company transfers (such as salary payment, etc.);
2. Authorize Celsius to maintain and manage its cryptocurrency assets in the normal course of business;
In addition, attorney Sarah Cornell also suggested in the terms of the motion that the court allow Celsius to sell the bitcoins dug out by its subsidiaries, although this was reached during negotiations with the trustee. It should be noted that the current relevant documents are final The version has not yet reached Judge Martin Glenn, so it has not yet been formally approved. However, Judge Martin Glenn has granted the wages motion, allowing Celsius to continue paying benefits and wages to its employees.
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Celsius Mining Business Motion: Not to sell mined bitcoins
Celsius’ mining subsidiary is likely to be a key part of its restructuring plan, as several of the motions involved relate to fee provisions for mining facilities that are still under construction, including:
1. Cash management initiative. It is reported that the cash management initiative has been readjusted, which will restrict Celsius from selling mined bitcoins, but the relevant clauses should be deleted in the motion in the future (Note: Celsius claims that the motion may still be retained in the future to prevent them from selling terms of Bitcoin).
2. Motion for repayment of key creditors. In the key creditor payment motion, Celsius needs to seek to obtain $3.76 million in funds within the next 21 days, and then pay them to the creditors they believe are the most important, such as those related to the construction of mining facilities, but the US Department of Justice Office of the Trustee The motion was denied because they wanted creditors to provide more information in the regulator's conversations with Celsius. According to attorney Sarah Cornell, Celsius did not provide an adequate list of key creditors, did not know whether their client entities were in the United States, and what relationship each entity had with Celsius. Judge Martin Glenn acknowledged that companies are often reluctant to disclose information about their key creditors in litigation, but said he would grant key creditor repayment motions as long as Celsius could provide a more detailed list.
4. Motions for tax reductions and exemptions. Celsius is also seeking relief from taxes and duties within the next 21 days, and evidence shows that the company has not paid certain taxes since 2020, and may seek relief of up to $22 million in taxes or duties in future proceedings. Considering the huge amount of back taxes, the U.S. Department of Justice’s Office of the Trustee asked Celsius why it needed $1.5 million in such a short period of time. Celsius replied that they imported many mining machines, so it involved paying tariffs. Judge Martin Glenn granted the motion.
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Next step: Establishing a creditor committee
As of now, the final date for the next trial hearing has not been officially set, but the court will continue to meet on Zoom at 11 a.m. on August 10.
