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.
judge glenn approving a $215M altcoin fire sale into BTC and ETH. those dump candles on july 1 2023 were textbook forced liquidation
those dump candles on july 1 2023 were textbook forced liquidation. 215M in alts hitting the market in one window
244980 the dump candles on july 1 were visible from space. $215M in alts hitting illiquid order books in a single session. textbook forced selling
215 million in altcoins getting dumped on the market and judge glenn just greenlit the whole thing. wonder how many of those 15 tokens are gonna tank when the selling starts
the SEC basically forced this by classifying them as securities. celsius had no choice but to convert to btc and eth
the SEC classified them as securities so celsius had no choice. conversion to BTC and ETH was the only path the court would approve
Raheem A. SEC classifying tokens as securities mid-bankruptcy forced the conversion. Celsius didnt choose BTC and ETH, the court did
Raheem A. SEC classifying 15 tokens as securities mid-bankruptcy was the real power move. forced celsius into BTC ETH conversion and set precedent for every future case
glenn_dissent_ SEC classifying tokens mid-bankruptcy wasnt a power move it was regulatory opportunism. they waited until creditors had zero leverage
15 altcoins worth 215M getting dumped starting july 1. every one of those charts is about to look like a cliff edge
judge glenn waiting a full year after the june 2022 withdrawal pause to approve this. custody accounts exempt was the only fair call in the whole mess
judge glenn gave them the green light to dump 215M in alts starting july 1. every degen on CT was front-running the Celsius wallet movements
front-running the celsius wallet was basically a sport on CT. everyone tracking the on-chain movements trying to dump before the dump
140005 converting 15 altcoins at whatever the market price was on july 1 is brutal. anyone holding CEL token got the worst deal in crypto bankruptcy history
paused withdrawals in june 2022, filed bankruptcy july 2022, and now finally converting altcoins in july 2023. a full year of waiting for custody account holders. brutal
rugpull_sally a full year of waiting and custody accounts exempt. small mercy for the people who actually held their own keys
altbag_survivor SEC classifying tokens as securities during a bankruptcy proceeding set a weird precedent. glad custody accounts were exempt
SEC classifying tokens as securities during a bankruptcy proceeding set a weird precedent. glad custody accounts were exempt at least
altbag_survivor custody accounts being exempt was the bare minimum. everyone else got force-converted to BTC and ETH at whatever the market price was on july 1. no vote, no choice
custody and withhold accounts exempt from conversion was the only fair part of this ruling. everyone else got forced into BTC and ETH whether they wanted it or not
174988 custody accounts being exempt was literally the bare minimum. everyone else got force-converted at whatever price the market was at
judge glenn basically gave celsius a blank check to dump customer bags. SEC classifying 15 tokens as securities mid-bankruptcy was the real knife
15 altcoins worth $215M converted to BTC and ETH in one window. the dump candles on july 1 2023 were visible from space
glenn_bench_ the front running was wild. every wallet Celsius moved to was tracked in real time on CT and people dumped before the dump
the real question nobody asks is how much BTC and ETH Celsius actually distributed vs how much the estate kept for legal fees