Fran is a writer and reporter at CoinDesk.

Celsius Network, a crypto lender that filed for Chapter 11 bankruptcy on Wednesday, could stick around in some form, according to one restructuring expert.

Ryan Preston Dahl, a partner at the law firm Ropes & Gray LLP, told CoinDesk TV’s “First Mover” that Celsius is tackling “uncharted territory.”

“There’s really no precedent for a [crypto brokerage] business like [Celsius] trying to navigate through a reorganization as opposed to a liquidation,” Dahl said.

Dahl noted that Celsius’ hybrid-like business model of lending and providing brokerage services makes it challenging to pinpoint what the company’s future will be in the coming months.

He said that banks and brokerage firms cannot file for Chapter 11 bankruptcy protection. In a traditional brokerage liquidation like that of the Lehman Brothers, “a trustee gets appointed, it administers the assets, and the brokerage goes away.” That, however, is “not the goal for Celsius.”

Dahl’s comments follow a crypto shakeout that has included bankruptcy filings by crypto hedge fund Three Arrows Capital and crypto broker Voyager Digital.

Celsius filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York, even though its headquarters are in Hoboken, N.J.

Its choice to file in a different state than where it is based isn’t an “uncommon phenomenon,” but does raise questions about why it chose to do so.

“It’s not exactly clear what the nexus is between Celsius in New York,” Dahl said. “It appears they may have significant assets located in New York.”

Dahl said that the Southern District of New York may be a “more favorable place to file,” partly because the court is “widely regarded as one, if not the most sophisticated jurisdiction for large-scale corporate insolvencies.”

In the past, big companies, including Lehman Brothers, General Motors and Enron, filed in the Southern District of New York. Three Arrows Capital and Voyager Digital also filed in that district.

Dahl said Celsius is likely to face lots of scrutiny about its business model and will need to be prepared to disclose discussions that were going on internally, as well as how it was presenting itself to customers.

“A lot of questions can be asked about really what was going on that caused this to happen,” he said. “But at the same time, that sort of means, was this really an appropriate vehicle for retail investors to participate?”

Meanwhile, as users look to recover some of their losses, Dahl said there are no guarantees because the process “can take on a life of its own.”

“It can be many months, if not years, before creditors see recovery,” Dahl said, and before money can be distributed, questions “need to be answered and that can take time.”

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Fran is a writer and reporter at CoinDesk.

CoinDesk - Unknown

Fran is a writer and reporter at CoinDesk.