Cryptocurrency lending firm Celsius Network has received permission from a US bankruptcy judge to seek creditor approval for its bankruptcy plan.

The announcement will advance a proposal to exit Chapter 11 as a new entity owned by creditors of the failed lender.

Celsius’ disclosure statement and solicitation materials were signed off by Judge Martin Glenn, with the judge agreeing that the company had provided creditors with sufficient information to vote on the proposed restructure.

The official committee appointed to represent junior creditors have backed Celsius’s plan, and said that it will recommend that customers vote in its favour. Creditors have set a deadline of 20 September for stakeholders to submit votes on the proposal, with the company intending to seek final court approval of the restructure on 2 October.

Some creditors however have opposed the plan which will see crypto consortium Fahrenheit Group buy a minority stake for $50 million and publicly list the new company’s stock on the Nasdaq.

The plan will also return some crypto deposits to retail customers, with control of remaining business lines handed to Fahrenheit. Celsius said that its customers who had interest-bearing Earn accounts will receive a 67 per cent recovery through assets like Bitcoin and Ether, equity shares in the new company, and proceeds of post-bankruptcy litigation against its founder Alex Mashinsky.

Mashinsky, who faces litigation from the reorganised company, is already facing US criminal charges and a civil lawsuit in New York for allegedly misleading customers and artificially inflating the value of Celsius’s proprietary token.

Celsius benefited from a surge in crypto investment during the Covid-19 pandemic, growing to around 600,000 customers who held about $4.4 billion in interest-bearing accounts. Despite its growth, Celsius filed for Chapter 11 protection in July 2022.

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