Celsius Emerges from Chapter 11, Distributes $3 Billion to Creditors, and Ventures into Bitcoin Mining
Celsius Network, the crypto lending platform, has successfully navigated its Chapter 11 bankruptcy proceedings, concluding an 18-month journey marked by legal challenges and regulatory scrutiny. The approved reorganization plan, backed by an overwhelming 98% of account holders, involves the distribution of $3 billion in cryptocurrency and fiat to creditors. Additionally, the formation of a new Bitcoin mining company, Ionic Digital Inc., managed by Hut 8 Corp., signals a strategic shift for Celsius.
The approved plan, confirmed by the Bankruptcy Court for the Southern District of New York, signifies a significant milestone for Celsius, which paused withdrawals in June 2022, leading to its Chapter 11 filing a month later. This move garnered widespread support from creditors, dispelling initial concerns of Celsius fading away like other crypto lenders facing bankruptcy.
The restructuring process not only secured Celsius’ cryptocurrency assets but also involved settlements with regulatory authorities, including a substantial $4.7 billion settlement over fraud allegations with the United States Federal Trade Commission. Former CEO Alex Mashinsky, who resigned in September 2022, faced charges of financial fraud, manipulating the price of Celsius’ native token (CEL), and misleading customers.
Celsius’ emergence from bankruptcy introduces Ionic Digital Inc., a Bitcoin mining venture set to offer recoveries to creditors. The new company’s stock is anticipated to go public pending regulatory approvals, with Matt Prusak, Chief Commercial Officer at Hut 8, appointed as CEO. This strategic move aligns with Celsius’ commitment to maximizing value and recovery for creditors.
The company’s winding down of operations, including the discontinuation of mobile and web applications by February 28, reflects a controlled transition. Distribution mechanisms for creditors involve industry players PayPal and Coinbase, enhancing security, timeliness, and compliance.
David Barse and Alan Carr, members of the Special Committee of the Board of Celsius, express pride in Celsius’ achievements during the complex process. They highlight Celsius’ successful preservation and distribution of cryptocurrency assets, settlements with regulatory bodies, and the establishment of Ionic Digital as notable accomplishments.
The MiningCo Transaction, approved by the Bankruptcy Court, involves transitioning to a new phase where Celsius becomes a Bitcoin mining-focused entity. Stakeholders in Celsius are expected to hold equity in Ionic Digital through common stock, further aligning their interests with the crypto industry’s evolving landscape.
As Celsius embarks on this new chapter, the crypto industry witnesses a notable example of resilience and strategic adaptation. The MiningCo Transaction, coupled with the $3 billion distribution to creditors, underscores Celsius’ commitment to not only weathering the storm but also evolving and contributing to the dynamic cryptocurrency ecosystem.