Celsius Network Advances Bankruptcy Plan

Celsius Network's Bankruptcy Plan Approval

Celsius Network, a prominent crypto lender, has received approval from a U.S. bankruptcy judge to proceed with creditor voting on its bankruptcy plan. This development marks a significant step towards exiting Chapter 11 as a new entity owned by its creditors.

Background and Filing

Based in New Jersey, Celsius filed for Chapter 11 protection in July 2022, amidst a wave of bankruptcies in the crypto lending sector post-COVID-19. At the time, it had 600,000 customers with $4.4 billion in interest-bearing accounts.

Proposed Restructuring Plan

The proposed plan intends to return some crypto deposits to retail customers. Key business lines, such as bitcoin mining and staking, will be managed by the Fahrenheit Group, which includes Arrington Capital. Most customers with interest-bearing accounts are expected to receive a 67% recovery through liquid crypto assets like Bitcoin and Ether, equity in the new company, and litigation proceeds.

Recovery and Equity Distribution

Customers with non-interest-bearing accounts will generally see higher recoveries. Fahrenheit will acquire a minority stake for $50 million and list the new company on Nasdaq. This move will enable Celsius customers to sell their equity shares received as part of the bankruptcy recovery.

Legal Proceedings Against Former CEO

The reorganized company plans to pursue litigation against founder Alex Mashinsky, who is facing U.S. criminal charges and a New York civil lawsuit for allegedly misleading customers and inflating the value of Celsius's proprietary crypto token. Mashinsky has pleaded not guilty to these charges.

Next Steps

Creditors have until September 20 to submit their votes on the restructuring proposal. Final court approval is anticipated by October 2, setting the stage for Celsius's transition into a new era under creditor ownership.