Celsius Network, the bankrupt cryptocurrency lender that collapsed in spectacular fashion in mid-2022, has officially received court approval to begin converting its altcoin holdings into Bitcoin (BTC) and Ethereum (ETH) as part of its creditor repayment plan. The ruling, issued by Bankruptcy Judge Martin Glenn of the Southern District of New York on June 30, gives Celsius the green light to start the liquidation process effective July 1, 2023.
TL;DR
- Bankruptcy Judge Martin Glenn approved Celsius to convert all non-BTC and non-ETH crypto assets into Bitcoin and Ethereum
- The conversion process began on July 1, 2023, following extensive consultations with the SEC
- Approximately $215 million in customer altcoins are slated for conversion
- Creditors will be repaid exclusively in BTC and ETH under the bankruptcy plan
- The move comes after the SEC classified multiple crypto tokens as securities, requiring regulatory compliance
The Court Ruling and What It Means
The ruling explicitly states that Celsius “may sell or convert any non-BTC and non-ETH cryptocurrency, crypto tokens, or other cryptocurrency assets other than such tokens that are associated with Withhold or Custody accounts to BTC or ETH commencing on or after July 1, 2023.” This is a significant milestone in what has been one of the most closely watched bankruptcy proceedings in the cryptocurrency industry.
Judge Glenn’s decision was not made in isolation. It came after extensive consultations between Celsius and the United States Securities and Exchange Commission (SEC). The regulatory body has been increasingly assertive in its classification of various crypto tokens as securities, which means Celsius cannot simply distribute those assets to creditors without running afoul of federal securities laws. By converting everything into BTC and ETH — two tokens the SEC has consistently distinguished from securities — Celsius sidesteps a major regulatory headache.
From Collapse to Repayment
Celsius’s troubles began in June 2022 when the platform paused all customer withdrawals, citing “extreme market conditions.” Within weeks, the company filed for Chapter 11 bankruptcy, revealing a massive hole in its balance sheet that left hundreds of thousands of creditors in limbo. The collapse was triggered in part by the implosion of the Terra ecosystem and the broader contagion that swept through the crypto lending sector.
Fast forward to May 2023, and the bankruptcy court approved the sale of Celsius’s assets to the crypto consortium Fahrenheit, paving the way for a restructuring plan that would ultimately return value to creditors. The plan, with limited exceptions, restricts cryptocurrency distributions to BTC and ETH only.
The SEC Factor
The SEC’s involvement in the Celsius case is emblematic of a broader regulatory crackdown on the crypto industry throughout 2023. The Commission has filed lawsuits against major exchanges including Coinbase, Binance, and Bittrex, while simultaneously tightening its grip on how bankrupt crypto firms handle customer assets.
Celsius has been maintaining an ongoing dialogue with the SEC and state regulatory bodies to ensure that its distribution plan complies with all applicable federal and state laws. The company noted it would act “out of an abundance of caution, and without admitting the status of any particular token as a security under U.S. securities laws.”
With Bitcoin trading at approximately $30,590 and Ethereum around $1,925 as of early July, creditors will receive their repayments in the two most liquid and established cryptocurrencies — a small silver lining in what has been an agonizingly slow recovery process.
Why This Matters
The Celsius liquidation approval sets a precedent for how bankrupt crypto platforms handle customer assets in a regulatory environment that increasingly treats altcoins as securities. It signals that BTC and ETH are being treated as a distinct asset class by regulators — one that can be distributed without the same legal hurdles as other tokens. For the broader market, the conversion of roughly $215 million in altcoins into BTC and ETH could create meaningful buy pressure on the two largest cryptocurrencies. For creditors, it’s a long-awaited step toward closure, even if the amounts recovered will likely fall short of what was originally deposited.
Disclaimer: This article is for informational purposes only and does not constitute financial advice. Always do your own research before making any investment decisions.
215 million in altcoins that were probably worth 10x that at peak. the conversion timing was terrible for creditors
creditors got shafted twice. first the lockup, then the conversion at bear market prices. some of those altcoins 10xd within a year
the altcoins that 10xd were mostly DeFi governance tokens that crashed again anyway. creditors didnt miss as much as people think
215m was the bear market valuation. at peak those same altcoins were probably worth 2b+. timing is everything in bankruptcy
mashinsky out here pretending this is a win for creditors. converting at the bottom of a bear market lmao
The SEC classification angle is interesting. They basically forced Celsius to dump altcoins that were deemed securities. Unintended consequences of regulation.
unintended consequences is generous. the SEC knew exactly what would happen to those altcoin prices when they forced the classification
had 5 figures locked up. still waiting. btc and eth only is fine but the valuations theyre using are a joke