Crypto lender Celsius Network cleared to exit bankruptcy
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Celsius, which was once valued at US$3 billion, was one of the largest crypto collapses last year.
PHOTO: REUTERS
NEW YORK - Crypto lender Celsius Network received US bankruptcy court approval for a restructuring plan that will return cryptocurrency to customers and create a new company owned by Celsius creditors.
US bankruptcy judge Martin Glenn in Manhattan signed off on the restructuring in an order published on Thursday. The reorganised business will be managed by Fahrenheit, a consortium that includes hedge fund Arrington Capital, and it will focus on mining new Bitcoin and earning “staking” fees by validating blockchain transactions.
United States-based Celsius filed for Chapter 11 protection in July 2022, one month after freezing customer accounts to prevent withdrawals. Celsius, which was once valued at US$3 billion (S$4 billion), was one of the largest crypto collapses in 2022.
The crypto lender is working to implement the plan and is expected to emerge from Chapter 11 in early 2024, according to a post on social media platform X, formerly known as Twitter.
Arrington Capital founder Michael Arrington on Thursday said Celsius’ revival stands apart from other crypto companies that collapsed in 2022 and were unable to reorganise.
Crypto lenders BlockFi and Voyager Digital were wiped out in bankruptcy, and cryptocurrency exchange FTX remains stuck in Chapter 11 proceedings.
“Today marks the culmination of a journey that has been far too long and far too expensive for Celsius creditors,” Mr Arrington said in an e-mail. “We are eager to dig in on our go-forward plan to make things whole for our creditors.”
Fahrenheit will buy a minority stake in the reorganised Celsius for US$50 million and will publicly list the new company’s stock on Nasdaq, allowing Celsius customers to sell equity shares that they will receive as part of their bankruptcy recovery, according to court documents.
In addition to their stake in the new company, Celsius customers will receive a partial repayment of the cryptocurrency assets they deposited on the platform.
Celsius said on Thursday that it would return about US$2 billion in cryptocurrency to account holders.
The lender had 600,000 customers who held about US$4.4 billion in interest-bearing Celsius accounts when it filed for bankruptcy, according to court documents.
The restructuring plan includes a settlement that values Celsius’ proprietary crypto token, CEL, at 25 US cents. A court-appointed examiner reported in January that Celsius inflated the value of its own token to benefit company insiders, using methods that Celsius staff described as “very Ponzi-like”.
The reorganised company will pursue litigation against Celsius founder Alex Mashinsky, who already faces US criminal charges and a New York civil lawsuit for allegedly misleading customers and artificially inflating the value of CEL. Mashinsky has pleaded not guilty. reuters
