Celsius Network Plans Repayments to Customers
In a recent hearing, Celsius Network, the bankrupt crypto lender, revealed its intention to repay its customers by the end of the year. The company’s recovery plan involves transitioning into a user-owned Bitcoin mining operation called “NewCo.” Celsius Network’s attorney stated that the restructured company will receive an initial funding of $450 million from a consortium called Fahrenheit LLC, primarily backed by Arrington Capital.
Repayments with Bitcoin, Ethereum, and New Company Stock
Celsius Network plans to make partial repayments to its creditors using $2.03 billion worth of Bitcoin (BTC) and Ethereum (ETH), in addition to offering stock in the new company. Customers will also gain a stake in legal actions against former executives, including co-founder Alex Mashinsky.
Potential Hurdles and Objections
The approval of Celsius Network’s plan is currently being evaluated by Judge Martin Glenn. Some creditors with frozen funds and Lantern Ventures affiliates have challenged the plan, arguing that the new business has been overvalued. Security regulators’ clearance is also required.
Resurrecting a Failed Crypto Platform
If approved, Celsius Network’s plan would be one of the first instances of a failed crypto platform from 2022 being resurrected through Chapter 11 bankruptcy. Customers have been eagerly awaiting restitution since withdrawals were suspended in June 2022 following the collapse of the Terra/Luna ecosystem.
Objections to Celsius Bankruptcy Plan
Despite overwhelming creditor approval, objections to Celsius Network’s bankruptcy plan have arisen, particularly from the U.S. Trustee. However, most classes in the bankruptcy claim received more than 98% votes in favor of the reorganization. The plan involves selling assets to crypto consortium Fahrenheit Holdings, including Arrington Capital and U.S. Bitcoin Corp.
Celsius Network’s Bankruptcy Journey
Celsius Network filed for bankruptcy in July 2022 amidst the crypto winter. CEO Alex Mashinsky resigned in September 2022, and in July 2023, he was arrested on fraud charges. Celsius Network reached a $4.7 billion settlement with the U.S. over fraud allegations. Mashinsky’s banking and real estate assets have been frozen by court order.
Hot Take: Celsius Network Aims to Repay Customers Amidst Bankruptcy
Celsius Network’s plan to repay its customers by transitioning into a user-owned Bitcoin mining operation marks a significant step towards restitution for its users. With the support of a funding consortium and the offering of stock in the new company, Celsius aims to address the frozen funds and provide partial repayments using cryptocurrencies. However, objections from creditors and regulatory clearance may pose challenges to the plan’s approval. If successful, this bankruptcy case could serve as a precedent for reviving failed crypto platforms and restoring trust in the industry.
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