Troubled crypto lender Celsius is seeking support from its users to avoid having to file for Chapter 11 bankruptcy, as advised by its lawyers.
Chapter 11 of the US Bankruptcy Code allows a company to continue operating while it works out its debts. For approval by creditors, the firm proposed a reorganization plan that was supervised by a group of lawyers.
If Celsius files for bankruptcy, client positions will be sold at the current market prices and clients will be added to the list of creditors.
However, Celsius believes that avoiding bankruptcy would be more profitable for its clients, as it would give the company time to unwind trades that are stuck in illiquid positions.
To help with this, users can show their support by engaging the “HODL Mode” in their Celsius account.
The HODL mode is described on the Celsius account as a “security feature that gives you the ability to temporarily disable outgoing transactions from your Celsius account.”
When this HODL feature is enabled, clients will be unable to withdraw or send funds. After deactivation users need to wait 24 hours before these abilities are reinstated.
Since June 12 withdrawals and transfer of funds is paused on the Celsius Network, thus the HODL feature has no practical effect. However, according to the company, it will help show the lawyers the strength of feeling that exists among users.
The company recently hired Citigroup to advise on its financial options and lawyers from Akin Gump Strauss Hauer & Feld and restructuring-focused management consultants from Alvarez & Marsal.
Both the company and its CEO Alex Mashinsky have gone radio silent, after being advised to refrain from public statements.
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