Bankrupt crypto lender Celsius Network is looking to repay its customers by the end of this year, according to a recent hearing. Christopher Koenig, Celsius’ legal counsel, sought approval for its reorganisation plans from the judge during an 2 October hearing in New York.
Koenig shared details about a newly-formed company, NewCo, a major part of the reorganisation proposals that will be responsible for paying investors and evolving Celsius’ crypto business. This new entity is set to launch with $450million in seed funding.
A document filed on 29 September revealed that Celsius aims to repay its creditors using assets valued at $2.03bn, consisting of Bitcoin, Ethereum, and stock in the new company.
“The Plan provides the Debtors with a prompt and viable path out of bankruptcy – and the highest possible recovery of value for Celsius’ customers,” the company said in the recent court document.
What is NewCo?
NewCo is backed by a consortium of companies known as Fahrenheit LL. The group won a bid to acquire the Celsius Network earlier this year in May 2023. Fahrenheit will be responsible for the management of NewCo.
The primary objective of this new entity is to enhance Celsius’ existing Bitcoin mining activities, secure stakes in Ethereum, liquidate assets of the debtors involved in the bankruptcy proceedings, and scout for new business opportunities while staying compliant with regulatory standards.
In a recent vote, more than 98% of the creditor groups from Celsius voted in favour of the proposed reorganisation strategy. This plan estimates a return of 67% to 85% on their investments. These creditors are also set to receive equity in this newly formed entity.
While the reorganisation plan has received approval from most parties involved, there were objections from the U.S. Trustee, an entity backed by the Department of Justice responsible for supervising bankruptcy case administrations.
Now after the 2 October hearing, the final nod for the plan’s implementation lies with the U.S. Bankruptcy Court in New York’s Southern District.
Celsius wrote in its motion: “Confirmation of the Plan will allow the Debtors to move forward with the Restructuring Transactions set forth in the Plan and will provide the Debtors and their creditors with the best possible recovery and a smooth conclusion to these Chapter 11 Cases.”
Can Celsius bounce back?
Celsius Network was hit hard during the 2022 bear market after the collapse of the Terra ecosystem, which it had significant exposure to. This led them to file for bankruptcy on 14 July 2022.
Its customer base has been awaiting reimbursements since this fallout in summer 2022.
A year later, in July 2023, the US Securities and Exchange Commission took legal action against both Celsius and its then-CEO, Alex Mashinsky. The charges revolved around allegations of raising funds through unregistered and misleading offers associated with “crypto asset securities”.
Mashinsky was arrested the same day as these charges were made of financial fraud and misleading investors, among other accusations.
An approval of Celsius’s reorganisation plan would mark one of the first instances of a crypto platform, which collapsed via the 2022 bear market, to be revived through a Chapter 11 bankruptcy case.
