In a bid to rebuild trust and repay creditors, Celsius, the embattled crypto lender, is making waves with a two-pronged approach: distributing over $3 billion and forging a novel Bitcoin mining venture, Ionic Digital, co-owned by creditors and miners. While these moves offer hope, questions linger about long-term strategy, asset sales, and potential tax implications for creditors.
— Spot On Chain (@spotonchain) February 1, 2024
$3 Billion in Crypto and Fiat for Distribution
Embattled crypto lender Celsius is taking concrete steps towards recovery and creditor repayment. Under a confirmed reorganization plan, they’ve begun distributing over $3 billion in cryptocurrency and fiat currencies to creditors, offering some long-awaited relief. The platform is distributing over $3 billion in cryptocurrency, fiat, and Ionic Digital stock to creditors. This new Bitcoin mining company, owned by creditors, will further contribute to their recovery. Its stock is expected to be publicly traded.
After securing approval and addressing SEC concerns, Celsius, in collaboration with creditors, began the “MiningCo Transaction.” They also upped the crypto available for distribution by $250 million and received court approval for the plan in December 2023.
A Remarkable Milestone
A January 31 press release by the entity stated:
“Celsius Network LLC (“Celsius” or the “Company”) announced today that it has successfully emerged from bankruptcy by completing the transactions under its confirmed plan of reorganization (the “Plan”). The Plan was overwhelmingly approved by approximately 98% of the Company’s account holders and confirmed by the Bankruptcy Court for the Southern District of New York (the “Bankruptcy Court”) on November 9, 2023”
Eighteen months of navigating complex legal terrain, building stakeholder consensus, and cooperating with regulatory investigations have culminated in a significant milestone for Celsius: its successful emergence from bankruptcy. This journey yielded several key outcomes that benefit various parties.
First, Celsius tackled novel legal issues head-on, setting important precedents for the crypto industry and paving the way for future resolutions. By fully cooperating with regulatory investigations throughout the process, they demonstrated a commitment to transparency and accountability.
Second, over $3 billion worth of cryptocurrency and fiat will be distributed to creditors, offering substantial relief after a period of uncertainty. This prioritizes their interests and fosters trust within the financial system.
Investor-Own Mining Company
Third, the creation of Ionic Digital, Inc., a new Bitcoin mining company owned by Celsius creditors and managed by Hut 8, offers the potential for continued returns for creditors in the future. This innovative solution paves the way for creditor ownership and participation in the mining space.
Overall, Celsius’ successful exit from bankruptcy serves as a testament to the perseverance and collaboration of all involved. It showcases the potential for positive outcomes even within the complex and evolving landscape of cryptocurrency, setting a precedent for future resolutions in the industry.
Prioritizing Creditors in the Scheme
Plan Administrator Chris Ferraro emphasizes prioritizing creditor value and speed throughout the process. After 18 months, distributions have begun, marking a significant milestone.
Special Committee members Barse and Carr highlight the extensive teamwork and achievements, exceeding initial expectations of complete closure. Celsius navigated various challenges, secured assets, established a litigation trust, secured regulatory settlements, and most importantly, prioritized creditor recovery.
“Our exit from bankruptcy is the culmination of an extraordinary team effort and extensive collaboration between Celsius, Hut 8, strategic partners, and our creditors,” added David Barse and Alan Carr, members of the Special Committee of the Board of Celsius, who have been steering Celsius though its Chapter 11 process.
Restoring Confidence in Celsius
Barse and Carr continued: “When we were appointed in June 2022, everyone assumed Celsius would disappear completely like the other crypto lenders that were filing bankruptcy around the same time. We, however, believed that Celsius could navigate complicated legal, regulatory, and business issues. Among other achievements, Celsius secured the cryptocurrency on our platform, achieved a settlement with the preferred shareholders, ran a successful auction of the one reorganizable operating business to begin as a new Bitcoin mining company, established a litigation trust to pursue the innumerable counterparties that exploited Celsius and, possibly most importantly, settled with the DOJ, SEC, and CFTC. But most of all, we are proud of the preservation and distribution of cryptocurrency assets and enhanced recovery for customers and claim holders.”
Despite these unknowns, Celsius’ actions signify progress in their bankruptcy case and potentially contribute to rebuilding trust in the crypto industry. The success of Ionic Digital could create a new model for creditor involvement in mining, while the distribution of assets could positively impact the overall crypto market. Ultimately, only time will tell how these bold moves pan out, but they undoubtedly mark a significant chapter in Celsius’ recovery journey.