(Bloomberg) -- Cryptocurrency lender Celsius Network LLC may use its bankruptcy case to give creditors a choice between taking less than they are owed in cash, or making a bet on the long-term value of the cryptocurrencies at the heart of the company’s failure.

The company opened its first Chapter 11 court hearing Monday with a promise not to force its customers to accept any repayment they may be owed in US dollars or any other so-called fiat currency. 

“This is not a liquidation,” Patrick Nash, a bankruptcy lawyer for Celsius, told the judge overseeing the bankruptcy case in Manhattan. “All is not lost. We intend for this be a reorganization.”

In a slide presentation posted on the company’s bankruptcy website, Celsius said it may give customers “the option, at the customers’ election, to recover either cash at a discount or remain ‘long’ crypto.”

Celsius filed for court protection last week in a case involving billions of dollars of customer assets that are tied up on the platform, but with little agreement among experts on how cryptocurrencies should be treated under the US bankruptcy code. 

A committee of creditors will give customers an official voice in the case once the panel is appointed by the Office of the US Trustee, which is the arm of the US Department of Justice that oversees corporate bankruptcy cases. The filing has angered some customers, Nash said. Some have written letters to the judge overseeing the case asking about their accounts. 

Employees have received death threats, Celsius lawyers said during the hearing, while the company’s chief executive, Alex Mashinsky, watched over Zoom with his camera turned on. About 200 people participated in the video-based hearing.

The company expects some users may want to receive cash recoveries but that a “substantial majority” will wish to ride out the crypto winter by remaining “long crypto,” said Nash. 

According to Celsius’s terms of service, its users’ digital assets are “unsettled” and “not guaranteed” in the event of insolvency, which could mean that users may be treated as unsecured creditors.

Celsius’s case will force US Bankruptcy Judge Martin Glenn to grapple with several fundamental questions about how to treat a company that bills itself as a lender, but which has none of the traditional protections enjoyed by regulated banks.

Those include whether Celsius owns the crypto assets in its possession and whether the company can claw back any crypto that may have been taken out by customers just before the bankruptcy case began.

Glenn gave the company permission to pay routine bills and continue some operations, including an expansion of its cryptocurrency mining operations in Texas.

Under US law, traditional banks are not allowed to go bankrupt; instead they are taken over by regulators and customer deposits are protected. Bank holding companies, however, which do not hold any deposits, will sometimes use Chapter 11 to reorganize themselves and pay off creditors. 

For example, in 2008, the operating unit of Washington Mutual Inc. was taken over by federal regulators and all of its customer accounts were transferred to another bank, while the parent wound down operations under a $7 billion plan.

The bankruptcy case is Celsius Network LLC 22-10964, US Bankruptcy Court for the Southern District of New York (Manhattan).

(Adds proposed creditor committee with customer representatives in sixth paragraph.)

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