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Bitcoin Bull Run Might Mean a Better Payday for Celsius Creditors

Published July 19, 2023 5:11 PM
Omar Elorfaly
Published July 19, 2023 5:11 PM

Key Takeaways

  • Crypto analyst claims Celsius creditors may get full refunds if they just wait
  • What could lead to the desired crypto bull run?
  • Is Celsius’ Chapter 11 the perfect way out?

Ever since the collapse of Celsius, a failed crypto lender, which led to the suspension of $4.7 billion in client funds, the company’s customers have been scrambling to get their money back, or at least a bit of it.

At first, the company was ordered by the court to repay 72.5% of what it owes Custody clients, i.e. clients who just deposited their crypto with Celsius for safekeeping. Then, as part of the company’s Chapter 11 bankruptcy application, the company was ordered to partially refund Earn customers, who represent a majority of Celsius’ creditors. 

As part of the company’s refund plan, Celsius aims to repay its Earn clients in part Bitcoin and Ethereum, part NewCo shares, and part litigation fees.

Simon Dixon, founder of Bnk To The Future, now claims the failed crypto lender may have enough liquidity to pay all creditors in full if Bitcoin and Ethereum manage to surge in value.

Better Crypto, Better Refunds

Dixon tweeted  a financial breakdown of the liquidity needed to pay back Celsius customers in full. Focusing on the company’s new acquirer, Fahrenheit, Bnk To The Future’s founder estimated the values Bitcoin and Ethereum would need to reach for Fahrenheit to completely refund Celsius’ customers. 

Dixon first focused on the biggest gains acquired by Fahrenheit as it takes over Celsius, mainly mining operations.

“NewCo under @FahrenheitHldg includes Mining, Institutional Loans & Investments & is valued at approximately $1.4 billion. This includes $450 million in liquid crypto.Net equity value, therefore, is $950 million.”

The crypto analyst then provided a breakdown of the crypto values required to reach the liquidity that would enable Celsius to pay back its customers in full. Among the most notable numbers is a potential future value of Bitcoin at $54,879, which is almost double its value at the time of writing of this article of ~$30,000. Dixon also based his argument on an ETH value that would need to reach $3,750, as opposed to the current value of ~$1,900.

Chapter 11 Is An Easy Way Out

Besides the disappointing percentages of owed refunds the company decided on its distribution plan, the act of filing for Chapter 11 bankruptcy doesn’t seem to sufficiently punish Celsius directors nor discourage crypto entrepreneurs from creating a similar collapse.

Granted Celsius CEO Alex Mashinsky may face jail time – which Celsius reported would not affect the proceedings of the company’s Chapter 11 distribution plan – other directors are walking away from the turmoil scot-free.

On top of that, as part of Fahrenheit’s acquisition plan, the company planned on creating NewCo, mainly managed by Celsius directors who were part of the collapse to begin with.

Finally, the Bankruptcy’s initial decision to only force Celsius to partially refund a small portion of their customers (after losing a total of $4.7 billion) sets a bad precedent that may encourage future like-minded entrepreneurs to gamble with customer funds, seeing that the punishment doesn’t seem too bad considering the magnitude of the collapse. 

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