- Two investors at Celsius requested a committee to defend their interests in bankruptcy proceedings.
- Investors claim the process was all about the customers without regard for equity holders.
- The motion requested the court to cap claims at the US dollar value as of the bankruptcy petition date.
On Thursday, two equity holders of the crypto lending platform Celsius submitted a request for a committee to defend their interests in bankruptcy proceedings. The investors was expressing their worries that the bankruptcy process is overly focused on retail customers.
The law firm Milbank LLP filed the application in the bankruptcy court for the Southern District of New York to create a Preferred Equity Committee. The Committee will represent Series A and Series B shareholders and to give them priority in the sale of custodial company GK8 and the Celsius mining activities.
Without these steps, the court action “would be unfairly and inequitably tilted in favor of the consumers to the prejudice of the Equity Holders,” according to the two corporations.
The statement read:
Not only is the Unsecured Creditors Committee (UCC) laser-focused on maximizing value for the customers, without regard for the Equity Holders, but the Debtors also have made it abundantly clear that the UCC is their partner, and these cases are all about the customer.
According to the attorneys, a fiduciary should represent the equity holders in the legal fight before a proposed reorganization plan.
Furthermore, the motion asks the court to set a claim ceiling equal to the claim’s value in US dollars as of the filing date of the bankruptcy petition. If bitcoin prices rise throughout the proceedings, equity holders — rather than customers — will benefit. But, if crypto declines, customers suffer.
Thomas Braziel, the founder of bankruptcy investment specialist 507 Capital, commented: “This is a total bombshell likely to alienate the entire creditor body and constituencies. It is potentially leading to World War III in the Celsius case.”