Celsius Network Cleared to Exit Bankruptcy and Transition to Bitcoin Mining Firm
The failed crypto lending firm Celsius Network has been cleared to exit bankruptcy and enact its recovery plan, Bloomberg reported on Nov. 9.
The report indicates that the company won approval in bankruptcy court to convert its business into a creditor-owned Bitcoin (BTC) mining firm.
The plan will also see the company compensate users whose account balances were previously frozen. Those users will receive both cryptocurrency and stock in the new company. Celsius expects to begin distributing those assets in early 2024.
According to court documents, the settlement will distribute Celsius’ CEL token at a value of $0.25. Earlier developments in the case saw various customers and creditors object to a CEL distribution because of the token’s reduced value. However, Celsius and its unsecured creditors committee argued for this approach, and U.S. Bankruptcy Judge Martin Glenn ultimately ruled that a distribution using the CEL token is reasonable.
Though the plan has been approved in bankruptcy court, the U.S. Securities and Exchange Commission (SEC) must also approve it. Otherwise, Celsius may need to liquidate its assets instead. Judge Glenn has asked the SEC to reach a decision quickly.
Celsius faces far-reaching regulatory action
Celsius halted withdrawals and entered bankruptcy in mid-2022 amidst a broader liquidity crisis among crypto companies engaged in lending.
Though the bankruptcy trial has largely concluded, this does not mark the end of the company’s challenges. The Commodity Futures Trading Commission (CFTC) and SEC filed parallel actions against Celsius as well as its former CEO, Alex Mashinsky, in July 2023. The company also reached a settlement with the Federal Trade Commission (FTC) at that time, which will permanently bar it from handling customer assets.
In July 2023, the U.S. Department of Justice filed various criminal charges related to fraud against Mashinsky. The DOJ issued its charges in July 2023; recent reports indicate that Mashinsky’s criminal trial will take place in September 2024.
