Bankrupt crypto lender Celsius has received official court approval to begin converting all of its customers’ altcoin holdings into Bitcoin (BTC) and Ethereum (ETH) starting July 1, 2023, marking a pivotal step in the company’s ongoing bankruptcy proceedings.
TL;DR
- Bankruptcy Judge Martin Glenn approved the liquidation plan on June 30, 2023
- 15 different altcoins worth over $215 million will be converted to BTC and ETH
- The move follows extensive consultations with the SEC, which classified several of these tokens as securities
- Celsius paused withdrawals in June 2022 and filed for bankruptcy in July 2022
- Custody and withhold accounts are exempt from the conversion
Court Ruling Opens the Door for Mass Altcoin Conversion
Bankruptcy Judge Martin Glenn of the Southern District of New York issued the ruling on June 30, clearing the way for Celsius to “sell or convert any non-BTC and non-ETH cryptocurrency, crypto tokens, or other cryptocurrency assets” commencing on or after July 1, 2023. The decision comes after months of negotiations between Celsius and the U.S. Securities and Exchange Commission.
Celsius had filed its revised reorganization plan on June 15, following extensive consultations with the SEC and state regulatory bodies. The Commission recently classified a variety of crypto tokens as securities in its ongoing lawsuits against major exchanges, giving it the right “to challenge transactions involving crypto assets on any basis.”
Which Altcoins Are Being Liquidated?
The approved conversion covers 15 different tokens held in Celsius customer accounts. These include CEL, MATIC, ADA, LINK, LTC, DOT, BCH, AAVE, UNI, XLM, SOL, EOS, FIT, SRM, and BNB. The total value of these holdings exceeds $215 million at the time of the ruling.
The two largest positions are Celsius’s native token CEL, valued at approximately $70 million, and MATIC (Polygon), worth around $52 million. The CEL token has experienced a dramatic decline — down 80.8% over the past year and 51.5% in just the last 30 days, reflecting the collapse of the Celsius ecosystem.
Accounts classified as “custody” and “withhold” accounts are exempt from this conversion process. All other users will see their altcoin balances converted to BTC or ETH as part of the bankruptcy distribution plan.
Regulatory Pressure Mounts on Crypto Industry
The Celsius liquidation takes place against a backdrop of intensifying regulatory scrutiny. The SEC has recently filed lawsuits against Coinbase, Binance, and Bittrex, alleging that multiple cryptocurrencies traded on these platforms qualify as unregistered securities. Several of the tokens held by Celsius — including SOL, ADA, and MATIC — were explicitly named in the SEC’s complaint against Binance.
Out of what Celsius described as “an abundance of caution,” the company stated its intention to sell or convert tokens “in compliance with applicable exemptions to U.S. securities laws,” without admitting the status of any particular token as a security.
Not everyone is on board with the plan. David Adler, an attorney at McCarter & English representing a group of borrowers in the case, publicly opposed the conversion, stating that “this proposed treatment violates every consumer lending law out there.”
From Bankruptcy to Reorganization
Celsius first paused customer withdrawals in June 2022, sending shockwaves through the crypto lending industry. The company subsequently filed for Chapter 11 bankruptcy protection in July 2022, one of several major crypto firms to collapse during the turbulent market conditions of 2022.
In May 2023, Celsius was approved for acquisition by the Fahrenheit consortium, a group of crypto industry participants led by Arrington Capital and US Bitcoin Corp. The altcoin-to-BTC/ETH conversion is a key component of the reorganization plan, ensuring that creditors receive distributions exclusively in the two largest cryptocurrencies by market capitalization.
Why This Matters
The Celsius liquidation represents one of the largest forced altcoin sales in crypto history. With over $215 million in tokens being converted, the event could add meaningful selling pressure across multiple altcoin markets, though the distribution across 15 different assets may moderate the impact on any single token.
More broadly, the case highlights the growing intersection of bankruptcy law and crypto regulation. The SEC’s classification of multiple tokens as securities has effectively forced Celsius to convert holdings it might otherwise have distributed directly to creditors. As regulators continue to assert jurisdiction over digital assets, other bankruptcy estates may face similar requirements, fundamentally reshaping how failed crypto companies unwind their holdings.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always conduct your own research before making investment decisions.
so my CEL tokens get forcibly converted to BTC at the bottom and now celsius gets to decide the timing. cool cool cool
the SEC classifying tokens as securities then using that to control what happens in bankruptcy proceedings is a power move
15 altcoins worth 215M getting dumped onto the market. if you held any of those tokens outside celsius you should be watching this closely
CEL at 70M and MATIC being the second biggest position. that is a lot of sell pressure hitting two specific tokens
custody and withhold accounts exempt is the only sane part of this ruling. at least some users get to keep their actual coins
celsius paused withdrawals june 2022 and filed july 2022. a full year later and users are just now getting a resolution. the legal process is brutal