U.S. bankruptcy Judge approves Celsius reorganization, sets stage for creditor reimbursement

Judge Martin Glenn of the Southern District of New York Bankruptcy Court has confirmed the reorganization plan for the beleaguered crypto lender, Celsius Network. As of November 9, the path forward includes significant restitution to creditors and a strategic shift in business operations. The decision comes after overwhelming approval from Celsius creditors on September 27. Customers can expect a redistribution of approximately $2 billion in Bitcoin and Ethereum assets alongside shares in the newly established entity, NewCo. This development heralds a potential end to the saga that began with Celsius’s July 2022 bankruptcy filing and subsequent legal challenges faced by its executives.

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— Celsius NewCo Community (@CelsiusNewCo) November 6, 2023

New direction under Fahrenheit consortium

NewCo, set to take over the reins, will not only inherit the assets but also expand upon Celsius’s existing mining operations. Additionally, the new entity aims to monetize the former lender’s illiquid assets and pursue further developmental activities, all contingent upon regulatory nods. The Fahrenheit consortium, a crypto-native collective, will manage NewCo, bringing with it a wealth of industry experience. Among the consortium members is the Proof Group, currently in the headlines for its bid for the defunct FTX.

The transition comes in the shadow of legal turmoil for former Celsius CEO Alex Mashinsky, who faces a jury trial in September 2024 on multiple fraud charges. Similarly, the company’s former chief revenue officer, Roni Cohen-Pavon, awaits sentencing in December for fraud and price manipulation. Celsius’s journey from bankruptcy to rebirth as a mining operation underscores the volatility and regulatory scrutiny in the crypto sector. The US Securities and Exchange Commission (SEC), having previously clashed with similar enterprises, will oversee the public listing of NewCo, adding a layer of regulatory complexity and anticipation to the process.

SEC clearance and the road ahead

The SEC’s clearance remains crucial for NewCo’s future, with the possibility of a transition to liquidation if the mining venture stumbles. Judge Glenn’s confirmation order stresses that this approval does not constitute a stance on whether crypto tokens or the associated transactions fall under securities laws. The SEC retains full rights to challenge any crypto asset transactions under scrutiny. With the SEC expected to expedite its review process, stakeholders are looking toward a swift resolution that could close a tumultuous chapter for Celsius and its customers.

In essence, the approval of Celsius’s bankruptcy plan is a significant juncture in the crypto industry, marking a potential turnaround for customers affected by the lender’s collapse. With a new direction charted and regulatory hurdles to navigate, the industry watches closely as NewCo takes its first steps toward making amends and forging a new path in the crypto industry.