Celsius to Emerge from Bankruptcy With Repayment Plan Approved

By André Beganski

Celsius Network, the failed crypto lending company, is on track to exit bankruptcy after a judge approved its customer repayment plan in a Delaware bankruptcy court on Thursday.

The plan, presented to the bankruptcy court on Oct. 2, called for establishing a new entity with $450 million in seed funding. Dubbed NewCo, it will focus on Bitcoin mining and staking while being owned by Celsius’ once-spurned customers and creditors. 

Celsius, under the management of former CEO and co-founder Alex Mashinsky, collapsed alongside several high-profile crypto firms last summer, as crypto prices plunged. In October of 2021, the failed firm had $25 billion in assets under management.

Moving forward, the company will be managed by the Fahrenheit Group, a consortium that won its bid to acquire Celsius in May. NewCo plans on becoming a publicly traded company that’s listed on the Nasdaq, to “maximize liquidity” for creditors, according to a filing.

The approved plan also includes a distribution of “at least $2.03 billion” in cryptocurrency for creditors. After losing control of their accounts and crypto for more than a year, Celsius lawyers have signaled customers could see repayments early next year, per Bloomberg News.

In July, Mashinsky was hit with a slew of criminal charges and civil lawsuits for his conduct at the helm of Celsius. The Department of Justice, Securities and Exchange Commission (SEC), Commodities Futures Trading Commission, and Federal Trade Commission all took action.

Federal prosecutors arrested and charged Mishinsky with fraud, accusing the former CEO of orchestrating “a scheme to inflate the price of Celsius's proprietary token, CEL,” alongside Roni Cohen-Pavon, the company's chief revenue officer, and other employees.

Before the plan was approved, CEL spiked to $0.25 on Wednesday. However, the token has since fallen to $0.23, a decrease of 7% over the past day, according to CoinGecko.

U.S. Bankruptcy Judge Martin Glenn approved the plan without determining whether digital assets belonging to Celsius’ creditors are securities or commodities. However, he signaled the Securities and Exchange Commission (SEC) could challenge transactions.

“Nothing in this confirmation order [...] constitutes a finding under the federal securities laws as to whether crypto tokens or transactions involving crypto tokens are securities,” he said. “The right of the [SEC] to challenge transactions involving crypto tokens on any basis is expressly reserved.”

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