Celsius Network Seeks Redemption Through Bankruptcy Trial
Celsius Network has begun its bankruptcy trial with plans to reestablish itself as a user-owned Bitcoin miner. The company aims to repay customers whose funds have been frozen on the platform since June 2022 by the end of the year. Celsius’s lawyer revealed that the restructured company, expected to emerge from Chapter 11, will receive $450 million in capital and financial backing. A consortium called Fahrenheit LLC, led by Arrington Capital, will manage the mining business and provide the necessary financial support. Despite opposition from some customers unable to access their funds and challenges from an affiliate of Lantern Ventures, Celsius’s plan is being considered for approval.
First Revival of a Failed Crypto Platform Under Chapter 11
If approved, Celsius’s plan would be the first instance of a failed crypto platform being revived under Chapter 11 after a series of insolvencies last year. However, if the new company fails, liquidation may occur, resulting in lower repayments for customers. Celsius intends to partially repay creditors by distributing approximately $2 billion in Ethereum (ETH) and Bitcoin (BTC) and offering stock in the new company. Customers will also receive a stake in litigation against co-founder Alex Mashinsky and other former executives charged with fraud.
Founder Blames External Market Forces for Failure
Celsius halted customer withdrawals in June 2022 due to a cryptocurrency price downturn and subsequently filed for Chapter 11. Mashinsky was charged with wire fraud and other crimes, accused of making misleading statements and manipulating the price of CEL, Celsius’s native token. Mashinsky attributes Celsius’s failure to external market forces beyond his control, such as the crash of stablecoins Luna and TerraUSD and unexpected mass withdrawals by customers. An independent review revealed that Celsius had been using customer assets to fund its operational expenses since 2020.
Bankruptcy Trial to Determine Celsius Network’s Future
The outcome of the bankruptcy trial will determine Celsius Network’s future and shed light on the potential revival of failed crypto platforms under Chapter 11. Chris Ferraro, interim CEO, is scheduled to testify in support of the bankruptcy plan.
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