Cryptocurrency lender Celsius Network‘s murky journey through bankruptcy has taken another intriguing turn. The financially beleaguered firm, which filed for Chapter 11 last year, recently expressed its intention to begin returning frozen funds to customers by year-end during a hearing on October 2.
In an effort to gain its footing and satisfy its creditors, Celsius plans to transform its operations into “NewCo”, a user-owned Bitcoin mining venture. Backed primarily by investment firm Arrington Capital, a consortium named Fahrenheit LLC will provide the restructured company with a hefty initial funding of $450 million.
Celsius’s innovative plan also features the unique move of repaying creditors through a mix of $2.03 billion worth of Bitcoin and Ethereum, coupled with an offer of stock in the emergent company. Customers are also set to gain a stake in legal actions against Celsius’s former executives, adding yet another interesting twist to the saga.
However, despite securing the majority of votes supporting the proposed recovery plan, several hurdles remain for the crypto lender. Certain creditors and Lantern Ventures affiliates question the valuation of the new business, while further clearance from security regulators is needed. In particular, the U.S. Trustee voices objections, despite more than 98% votes favoring the reorganization.
The approval of the plan would notably signify one of the rare instances of a collapsed crypto platform from 2022 being efficaciously reincarnated through a Chapter 11 bankruptcy case. Celsius customers, who have seen their withdrawals suspended since June 2022 due to the collapse of the Terra/Luna ecosystem, are understandably eager for restitution.
Yet, the shadow of Celcius’s past missteps lingers over their hopeful plans. Charges of fraud laid at the door of co-founder and former CEO Alex Mashinsky and the subsequent $4.7 billion settlement with the U.S. government underline the substantial issues Celsius must overcome to regain trust and return to successful operations.
With Mashinsky’s banking and real estate assets currently frozen following his release on a $40 million bond, the future of Celsius—just like the turbulent crypto market it occupies—is anything but certain. What is sure, however, is that the company’s ambitious reorganization strategy will be minutely scrutinized in the coming months by creditors, customers, and crypto enthusiasts alike.
Source: Cryptonews
