Crypto lender Celsius Network cleared to exit bankruptcy. Customers would receive their bitcoin back under a reorganization plan that a U.S. bankruptcy court approved for cryptocurrency lender Celsius Network, and creditors of Celsius would control a new company.
Manhattan U.S. Bankruptcy Judge Martin Glenn approved the reorganization in an order released on Thursday. Fahrenheit LLC, a group that includes hedge fund Arrington Capital, will oversee the restructured company. Its primary goals will be mining new bitcoin and collecting “staking” fees by verifying blockchain transactions.
Based in New Jersey July 2022: Celsius, a month after suspending client accounts to stop withdrawals, filed for Chapter 11 protection. Celsius was one of the most significant cryptocurrency falls of the previous year, with a valuation of $3 billion.
According to a post on X, formerly known as Twitter, the cryptocurrency lender is striving to carry out the strategy and is anticipated to emerge from Chapter 11 in early 2024.
The rebirth of Celsius, according to Michael Arrington, founder of Arrington Capital, on Thursday, is distinct from previous cryptocurrency businesses that failed in 2022 and could not regroup.
Cryptocurrency exchange FTX is still entangled in Chapter 11 procedures, while cryptocurrency lenders BlockFi and Voyager Digital were bankrupt.
“Today marks the culmination of a journey that has been far too long and far too expensive for Celsius creditors,” Arrington said in his email. “We are eager to dig in on our go-forward plan to make things whole for our creditors.”
According to court filings, Fahrenheit will pay $50 million for a minority position in the reformed Celsius and list the new company’s stock publicly on Nasdaq, enabling Celsius customers to sell equity shares they will get as part of their bankruptcy recovery.
Customers of Celsius will get a partial refund of the bitcoin assets they invested on the platform in addition to a share in the new business. Celsius said on Thursday that it will give account holders their $2 billion back in bitcoin.
At the time of its bankruptcy filing, Celsius had 600,000 users and $4.4 billion in interest-bearing Celsius accounts, according to court filings.
A settlement that values Celsius’s exclusive cryptocurrency token, CEL, at 25 cents is part of the restructuring plan. In January, a court-appointed examiner found that Celsius had used “very Ponzi-like” tactics to inflate the value of its currency to enrich business executives.
The firm has reorganized and plans to take legal action against Alex Mashinsky, the creator of Celsius, who is already facing criminal charges in the United States and a civil case in New York for allegedly deceiving clients and inflating the value of Celsius artificially. Mashinsky entered a not-guilty plea.