The U.S. bankruptcy court has granted approval to Celsius Network for a restructuring plan, allowing the return of cryptocurrency to customers and the establishment of a new company owned by Celsius creditors.
U.S. Bankruptcy Judge Martin Glenn in Manhattan endorsed the restructuring in an order issued on Thursday. The revamped business, overseen by Fahrenheit LLC—a consortium including Arrington Capital hedge fund—will primarily engage in mining new bitcoin and generating “staking” fees through validating blockchain transactions.
In July 2022, Celsius, headquartered in New Jersey, filed for Chapter 11 protection, a month after halting customer account withdrawals. Once valued at $3 billion, Celsius represented one of the most significant crypto collapses in the previous year.
The crypto lender is currently in the process of executing the restructuring plan and is anticipated to emerge from Chapter 11 in early 2024, as mentioned in a post on X (formerly known as Twitter).
Michael Arrington, the founder of Arrington Capital, emphasized on Thursday that Celsius’ recovery sets it apart from other crypto companies that experienced collapses in 2022 and were unable to successfully reorganize.
BlockFi and Voyager Digital, crypto lenders, faced insolvency, while cryptocurrency exchange FTX remains entangled in Chapter 11 proceedings.
Arrington expressed in an email, “Today marks the culmination of a journey that has been far too long and far too expensive for Celsius creditors. We are eager to dig in on our go-forward plan to make things whole for our creditors.”
As per court documents, Fahrenheit is set to acquire a minority stake in the restructured Celsius for $50 million. The new company’s stock will be publicly listed on Nasdaq, enabling Celsius customers to sell equity shares received as part of their bankruptcy recovery.
In addition to their ownership stake in the new entity, Celsius customers will receive a partial reimbursement of the cryptocurrency assets they had deposited on the platform.
Celsius announced on Thursday its intention to repay approximately $2 billion in cryptocurrency to account holders. At the time of filing for bankruptcy, court documents revealed that Celsius had 600,000 customers with approximately $4.4 billion held in interest-bearing Celsius accounts.
As part of the restructuring plan, there is a settlement that assigns a value of 25 cents to Celsius’s proprietary crypto token, CEL. A court-appointed examiner, in a report from January, highlighted that Celsius had inflated the value of its token for the benefit of company insiders, employing methods described by Celsius staff as “very Ponzi-like.”
The reorganized company is set to pursue legal action against Celsius founder Alex Mashinsky, who is already facing U.S. criminal charges and a civil lawsuit in New York for allegedly deceiving customers and artificially inflating the value of CEL. Mashinsky has pleaded not guilty.
(Reporting by Dietrich Knauth; Additional reporting by Urvi Dugar; Editing by Alexia Garamfalvi, Lisa Shumaker, Bill Berkrot, and Diane Craft)