The insolvent cryptocurrency lending company Celsius Network LLC picks Fahrenheit as its savior. In an notice made on Thursday, May 25, 2023, Celsius Network LLC officially named Fahrenheit its ticket out of bankruptcy after a year of financial decline for the company.
A competitive three-way auction determined which company would take over Celsius’ financial burden. The month-long auction began in April 2023 and featured bids from the Blockchain Tech Recovery Investment Committee (BRIC), Fahrenheit Cryptocurrency Consortium, and cryptocurrency investment manager NovaWulf.
Why Did Celsius Network LLC File for Bankruptcy?
On June 12, 2022, the New-jersey-based Celsius Network LLC Network notified its stakeholders that it was pausing all withdrawals, transfers, and swaps betwixt customer accounts. The statement came after the company grew increasingly incapable of meeting customers’ redemption requests. Shortly after this notice, Celsius Network LLC and its affiliates voluntarily filed for Chapter 11 bankruptcy.
The bankruptcy plea, heard and granted in the United States Bankruptcy Court in New York’s Southern District, allowed the company to search for a buyer through an auction to secure it can potentially repay its debtors.
And once filing for bankruptcy, Celsius Network LLC had approximately 100,000 debtors and liabilities ranging from $1 – $10 billion. Conversely, the company only had $167 Million in cash on hand.
What Will Transition From Celsius Network LLC to Fahrenheit Entail?
Cryptocurrency corporations are still novel concepts. This implies there is little legal documentation on how to handle events such as insolvency. Nonetheless, using existing laws on insolvent institutions, plenty of steps must be followed before Fahrenheit can assume full financial responsibility over Celsius.
The 1st step will be to listen to the court’s verdict on the bid. Despite the fact that Celsius Network LLC and its creditors have approved the bid, the United States Bankruptcy Court that received the app must give regulatory approval.
To gain approval, Fahrenheit, under the governance of the United States Bitcoin (BTC) Corp. and Arrington Financial resources, will have to pay a $10 Million deposit within 3 days. Failure to do this will result in the bid being handed over to BRIC, a Gemini Foundation holding company.
Nonetheless, if approved, “Fahrenheit will provide the financial resources, management team, and technology to set up and operate the new company (NewCo).” Celsius’ statement adds that “Celsius’ account holders will own 100 percent of the new equity in NewCo,” it stated, adding that NewCo will be overseen by a new board of directors, a bulk of which will be appointed by creditors.”
Celsius Network LLC Reveals Fahrenheit, LLC as Winning Bidder to Manage New Entity to Be Owned by Celsius Network LLC Creditors
Winning bid positions Celsius’ assets to be transferred to “NewCo” under new executive leadership. Auction results in the distribution of hundreds of millions… pic.twitter.com/7SgW9aKbKb
— Celsians (@CelsiansNetwork) May 25, 2023
At this stage, Fahrenheit will take control of Celsius’s institutional loan portfolio. This will include mining units, staked digital currencies, and other investments. NewCo. will likewise receive $450 to $500 Million in liquid digital currency from Fahrenheit and take advantage of a new 100-megawatt cryptocurrency mining facility supported by United States Bitcoin (BTC) Corp.
Will Celsius Network LLC Account Holders Benefit From Move to Fahrenheit?
Despite the fact that Fahrenheit has is still to receive legal approval to take over Celsius Network LLC, the move, if approved, will be a substantial relief for Celsius Network LLC account holders. Celsius’ insolvency hindered numerous investors from accessing the funds they invested on the platform. It likewise spelled doom for future of the the company and its services.
On the other hand, through the move, Celsius Network LLC account holders can retrieve their assets. In addition, Celsius Network LLC services will resume and maybe even make better as a result of extra perks like the cryptocurrency mining facility that comes as part of the bid package.
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