- Crypto
- November 9, 2023
- 4 minutes read
Crypto Lender Celsius Cleared To Exit Bankruptcy
Failed crypto lender Celsius Network has gotten approval to exit bankruptcy proceedings and transform into a Bitcoin mining firm owned…
Failed crypto lender Celsius Network has gotten approval to exit bankruptcy proceedings and transform into a Bitcoin mining firm owned by its creditors.
U.S. bankruptcy judge Martin Glenn released a statement on Thursday noting that he’ll approve Celsius’s plan to exit bankruptcy and repay customers through a mix of cryptocurrencies and shares in the publicly-traded Bitcoin mining firm Celsius will transform into.
- Celsius filed for Chapter 11 bankruptcy in the Southern District of New York (SDNY) in July 2022. Glenn is the district’s chief bankruptcy judge.
Celsius owed users $4.7bn worth of cryptocurrencies at the time of its bankruptcy filing, making it one of the biggest cryptocurrency collapses. Alex Mashinsky, the company’s founder, was indicted for fraud a year later alongside Roni Cohen-Pavon, the company’s former Chief Revenue Officer.
Mashinsky pled not guilty to the criminal charges and was released on a $40mn bail bond pending trial. In contrast, Cohen-Pavon pled guilty to four criminal charges and agreed to cooperate with prosecutors; he is free on a $500,000 bond pending sentencing.
- The reorganized Celsius will be managed by a consortium led by investment firm Arrington Capital. It’ll focus on mining new Bitcoin, the world’s most popular cryptocurrency, and earning “staking” fees by validating (non-Bitcoin) blockchain transactions.
- The new company will have a $1.25bn balance sheet, including $450mn in liquid cryptocurrency assets that it’ll stake to “generate anywhere from $10 to $20 million per year.” The Arrington-led consortium will pay $50mn for a minority stake in the business and list its shares on the Nasdaq stock exchange.
Celsius’s creditors will receive shares in the publicly traded company and partial repayment in cryptocurrencies. Bankruptcy filings estimate that creditors could recover 67% to 85% of their assets from the exit plan, as opposed to 47% if all assets were immediately liquidated and distributed to creditors.
Though cleared by the presiding bankruptcy judge, the exit plan isn’t yet set in stone. It requires further approval from the U.S. Securities and Exchange Commission (SEC). Celsius said it could pivot to a direct liquidation if the current plan falls through.
- If cleared by the SEC, Celsius would become the first of the big six crypto collapses to reemerge from bankruptcy successfully. The other five major collapses are exchanges FTX and Voyager Digital, lenders Genesis and BlockFi, and hedge fund Three Arrows Capital (3AC).
- BlockFi recently won approval to liquidate its assets to repay creditors and shut down its business. FTX, the biggest collapse, remains in bankruptcy proceedings, and its infamous founder, Sam Bankman-Fried, was recently convicted of fraud and conspiracy after a monthlong trial in a New York federal court.
