- Celsius creditors have received a warning about a potential “rug pull” if Bitcoin and Ethereum reach certain price points
- Similar to the MtGox incident in 2017, the increasing value of company-held assets could be used to settle USD claims, retaining other assets
- Creditors are urging swift crypto payouts to preempt the bankruptcy court from ordering such payouts at elevated asset valuations.
Celsius creditors have been warned of a potential “rug pull” if Bitcoin and Ethereum reach certain price points. In a situation similar to that which affected MtGox creditors in 2017, the increasing value of the assets held by the company and reserved for creditors means that the appreciated prices could be used to “pay off our $USD claims & keep all other assets.” Creditors are therefore urging that the promised crypto payouts be made before these levels are met to prevent the bankruptcy court from ordering such a payout.
$55,000 Bitcoin Could Spell Trouble
Celsius filed for bankruptcy in June 2022 owing $1.2 billion, with the company announcing that it was exiting bankruptcy last month. The potential for a “rug pull” was referenced back in July by Simon Dixon, CEO of BankToTheFuture, a major Celsius investor, who mentioned that the firm would be able to “rug pull all creditors” if Bitcoin reaches $54,879 per coin and if ETH reaches $3,750:
I was asked in my Space what price of #Bitcoin & $ETH would allow #Celsius & the bankruptcy code to rug pull us by using #BTC & $ETH price appreciation to pay off our $USD claims & keep all other assets.
The Investment Banking team at @BankToTheFuture gave me the numbers today… pic.twitter.com/EW8fuBVhLG
— Simon Dixon (@SimonDixonTwitt) July 19, 2023
Back in July these sorts of prices were pie in the sky, but, with Bitcoin hitting $44,000, they present a very real possibility, bringing another of Dixon’s comments into sharp relief:
It is very important that we get out of Chapter 11 before Bitcoin & ETH approach these numbers to avoid another rug pull that we will need to fight hard against if it comes up.
Were Bitcoin and Ethereum to hit those prices, creditors could be made whole with either a cash sale or less crypto, leaving them worse off if the bull run continues.
Echoes of MtGox
The situation echoes what happened with MtGox; the exchange imploded in 2014, but when the crypto market recovered and went exponentially crazy in 2017, creditors were faced with the possibility of having their money paid out in cash once the dollar value was met and billions of dollars worth of bitcoin staying with MtGox’s parent company, rather than going back to creditors.
Eventually, the company went into civil rehabilitation, removing that possibility.
