Celsius Network Starts Distributing $3 Billion to Creditors, Emerges from Chapter 11 Bankruptcy
Celsius Network initiated distribution of $3 billion worth of crypto and fiat to creditors, after its recent Chapter 11 bankruptcy filing.
Cryptocurrency lender Celsius Network initiated the distribution of $3 billion worth of cryptocurrency and fiat to its creditors, signaling the official resolution of its Chapter 11 bankruptcy. This comes 18 months after the temporary suspension of user withdrawals, reflecting the company’s efforts to address financial challenges and restore stability.
According to the company’s statement, a portion of the $3 billion will be allocated as part of Celsius Network’s approved reorganization plan to establish Ionic Digital, a new Bitcoin mining company owned by creditors.
Celsius Network creditors will take ownership of the Bitcoin mining company through common shares, with the anticipation that these shares will become publicly traded following the company’s attainment of necessary approvals. Additionally, Miami-based mining company Hut 8 is set to supervise Ionic’s mining operations as part of a four-year management agreement.
With this transition, Celsius Network intends to gradually phase out operations by initiating the closure of its mobile and web applications. The distribution of cryptocurrencies will be facilitated by PayPal and Coinbase.
“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,” said David Barse and Alan Carr, members of the Special Committee of the Board of Celsius Network, who have been actively guiding Celsius Network through its Chapter 11 process.
David Barse and Alan Carr further highlighted that during the process, they successfully safeguarded the platform’s cryptocurrency, engaged in negotiations with creditors, restructured the operational segment of the company deemed viable, and resolved cases with the United States Department of Justice, Securities and Exchange Commission (SEC) and Commodity Futures Trading Commission.
Celsius Network’s Path Ahead
Celsius Network declared bankruptcy in 2022, following the identification of a $1.2 billion gap in its balance sheet. Chapter 11 bankruptcy facilitated the company in sustaining its operations while fulfilling its commitments to creditors and other indebted parties.
Last year, Celsius Network, along with its founder and former CEO Alex Mashinsky, faced legal action from multiple regulators, including the SEC, the Federal Trade Commission, and the Commodity Futures Trading Commission. The allegations centered around the purported misleading of customers. Additionally, Alex Mashinsky was charged with fraud, and his trial is set to commence in September.
Recently, the company disclosed intentions to release its current cryptocurrency holdings, unstaking them to streamline the distribution of assets to eligible creditors. The plan involves allocating assets from its Ethereum and Bitcoin holdings, valued at approximately $250 million that previously served as a revenue source for the company, assisting in covering expenses incurred during its restructuring process.
Celsius Network’s journey through bankruptcy, strategic shifts, and legal challenges reflects the company’s resilience and adaptability in navigating this evolving dynamics.
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