Celsius Network emerges from bankruptcy with $3 billion payout to creditors and new Bitcoin mining venture
Celsius Network, a former crypto lending platform, has successfully exited bankruptcy by distributing over $3 billion of cryptocurrency and fiat to its creditors and launching a new Bitcoin mining company called Ionic Digital.
The company announced on Wednesday that it had completed the transactions under its confirmed plan of reorganization, which was approved by 98% of its account holders and the Bankruptcy Court for the Southern District of New York in November 2023.
The plan involved the creation of Ionic Digital, a new Bitcoin mining company that will be owned by Celsius’ creditors and will have its mining operations managed by Hut 8, a leading Bitcoin mining and hosting company. Ionic Digital is expected to become a publicly traded company once it receives the necessary approvals.
Celsius Network filed for Chapter 11 bankruptcy in June 2022, after it was accused of operating an unregistered securities offering and misappropriating funds from its customers. The company faced multiple lawsuits and investigations from regulators, including the SEC, the CFTC, and the New York Attorney General.
The company said it had cooperated fully with all regulatory inquiries and resolved complex legal issues during its 18-month bankruptcy process. It also increased the amount of cryptocurrency that would be available for distribution to creditors by nearly $250 million by converting altcoins to BTC or ETH and through previous settlements.
“Creating the best outcome for creditors by maximizing value and speed have been front of mind for Celsius throughout this process,” said Chris Ferraro, Plan Administrator and former Chief Restructuring Officer, Interim Chief Executive Officer, and Chief Financial Officer. “Today, over 18 months after Celsius paused withdrawals, we began distributing over $3 billion of cryptocurrency, fiat, and stock in Ionic Digital to Celsius creditors.”
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, praised the team effort and collaboration that led to the successful exit from bankruptcy.
“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,” they said.
Celsius Network was founded in 2017 by Alex Mashinsky, a serial entrepreneur and inventor of the Voice over Internet Protocol (VoIP). The company claimed to offer high-interest rates on crypto deposits and low-interest rates on crypto loans, using a decentralized and transparent model. However, the company faced growing scrutiny and criticism over its lack of regulatory compliance, its opaque business practices, and its alleged Ponzi-like scheme.
The company’s bankruptcy case is one of the largest and most complex in the crypto industry, involving over 100,000 creditors and over $4 billion of assets. The case also raised novel legal and technical questions about the nature and treatment of cryptocurrency in bankruptcy.
The emergence of Celsius Network from bankruptcy marks the end of a turbulent chapter in the crypto lending space, which has seen several other platforms collapse or face legal troubles in recent years, such as Cred, Salt Lending, and Nexo. The case also highlights the risks and challenges that crypto investors and borrowers face in a largely unregulated and volatile market.
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