A recent ruling by a US judge has granted bankrupt cryptocurrency lender Celsius the ability to convert its altcoin holdings into Bitcoin (BTC) and Ethereum (ETH) for financial relief. The decision, made by Judge Martin Glenn of the Southern District of New York, allows Celsius to convert all non-BTC and non-ETH cryptocurrencies into the top two digital assets by market cap starting from July 1st, 2023.
In addition to the conversion privilege, Celsius is also required to use “commercially reasonable methods” to maximize the value of the altcoins they wish to convert. The company must provide a monthly report detailing the amount of altcoins converted to Bitcoin and Ethereum, ensuring transparency and accountability.
The move comes after Celsius filed for bankruptcy in July 2022, following a significant drop in the value of its native asset and its inability to meet customer withdrawal demands. Subsequently, the troubled firm faced a class action lawsuit alleging that it operated as a “literal” Ponzi scheme. The lawsuit named several of Celsius’ executives, including the then-CEO Alex Mashinsky, as the perpetrators.
Early in 2023, the New York State Attorney General Letitia James filed a lawsuit against Mashinsky, accusing him of making misleading statements to investors and failing to register properly as required by state law. The attorney general claimed that Mashinsky had promised low-risk investments in reputable companies but instead engaged in high-risk lending practices.
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Mashinsky responded to the allegations by stating that they were based on misinformation, denying any wrongdoing. The legal battle between Celsius and the New York State Attorney General’s office continues.
The ruling by Judge Martin Glenn provides a potential lifeline for Celsius as it navigates through its bankruptcy proceedings. By allowing the conversion of altcoins to Bitcoin and Ethereum, the company may be able to salvage some value from its crypto holdings and potentially alleviate its financial obligations.
However, it is important to note that this ruling does not absolve Celsius of its alleged fraudulent activities or mitigate the legal challenges it faces. The company will still need to address the class action lawsuit and the claims made by the New York State Attorney General’s office.
The decision to convert altcoins to Bitcoin and Ethereum reflects the dominance and stability of these two cryptocurrencies in the market. Bitcoin, as the first and most well-known cryptocurrency, continues to hold the largest market cap and serves as a store of value for many investors. Ethereum, on the other hand, has established itself as a leading platform for decentralized applications and smart contracts, attracting significant interest and investment.
By converting altcoins to Bitcoin and Ethereum, Celsius may be aiming to tap into the liquidity and market demand for these digital assets. These two cryptocurrencies have a more established and widely accepted market presence compared to other altcoins, making them potentially easier to sell or use for collateral.
It is also worth mentioning that Celsius must act responsibly in converting its altcoins. The requirement to use “commercially reasonable methods” ensures that the company does not engage in any practices that could harm its creditors or manipulate the market. Compliance with this requirement will be closely monitored through the monthly reports that Celsius is obligated to provide.
In conclusion, the recent ruling allowing Celsius to convert its altcoin holdings into Bitcoin and Ethereum provides a glimmer of hope for the troubled cryptocurrency lender. However, it will not absolve the company of its alleged fraudulent activities or the legal challenges it faces. Celsius will still need to address the class action lawsuit and allegations made by the New York State Attorney General’s office. The conversion of altcoins to Bitcoin and Ethereum reflects the dominant position of these cryptocurrencies in the market and may provide Celsius with some financial relief during its bankruptcy proceedings.
