Celsius Exits Bankruptcy As Court Approved Restructuring Plan

The Southern District of New York Bankruptcy Court approved Celsius’ restructuring and customer repayment plan. The court approval came a month after Celsius submitted the proposal.

The plan is set to partially repay Celsius’ creditors in cryptocurrency, including $2 billion worth of Bitcoin and Ethereum. Creditors will also receive shares of NewCo, a new crypto mining company funded by Celsius and owned by creditors.

Moving Forward

NewCo’s mining and staking operations are currently run by Fahrenheit, an investment group led by TechCrunch founder Michael Arrington. Fahrenheit reached an agreement with Celsius Network in May 2023.

Despite granting greenlight from the court, the plan still needs to be accepted by the U.S. Securities and Exchange Commission (SEC). Judge Martin Glenn for the New York Court has urged the securities agency to decide on the plan.

If things go according to the plan, repayment distribution will come next year. However, if the SEC rejects Celsius’ plan, the firm might look for another option, like liquidation, per Bloomberg.

Celsius was among the companies under liquidity crisis following the collapse of the algorithm stablecoin LUNA/TerraUST. In June, Celsius reportedly had paused withdrawals, citing the market setback before proceeding its bankruptcy filing under Chapter 11 the month after.

As previously estimated, Celsius held over $218 million worth of altcoins, including CEL, MATIC, ADA, LINK, DOT, SOL, XLM, and LTC, among others. The company repaid over $800 million to three of its creditors, including Aave, Maker, and Compound.

Failed Companies Start to Repay Customers

Celsius is not the only entity affected by the LUNA crash to exit bankruptcy. Crypto lender BlockFi announced in October its plan to launch its withdrawal and debt repayment portal.

BlockFi has exited bankruptcy and is now able to retrieve assets from other indebted entities, such as Three Arrows Capital and FTX. BlockFi can also resume asset distribution to creditors and claims processing.

Users with assets on BlockFi can submit withdrawal requests through the app. BlockFi is also preparing for the initial distribution phase under the bankruptcy plan for BIA and Lending account holders.

The first distribution is expected to take place in early 2024, with subsequent distributions to follow. The amounts distributed will depend on the outcome of BlockFi’s success in the bankruptcy case, which involves factors such as the status of FTX products and other considerations.

BlockFi encountered liquidity issues in mid-2022 following the collapse of Terra. FTX extended a lifeline to BlockFi with a $400 million line of credit at that time. Unfortunately, FTX declared bankruptcy in November, resulting in BlockFi being entangled in the financial meltdown.

Some companies that declared insolvency last year after a series of market-wide shocks have shown positive signs of recovery, even reopening. Bankrupt crypto exchange FTX, under new leadership, is planning a rebrand to FTX 2.0 and is reportedly in talks with investors to reboot the exchange.

SEC Chairman Gary Gensler said on Thursday that the agency is considering the relaunch of FTX, but only if the company complies strictly with the law.

Gensler’s statement came after reports that Tom Farley, former president of the NYSE Group, and other bidders, including Fintech Figure Technologies and Proof Group, are interested in buying FTX.

FTX’s current team is focused on developing a creditor repayment plan. They have also said that they are committed to working with regulators to improve compliance and transparency at the company.

Meanwhile, FTX’s former CEO Sam Bankman-Fried was found guilty on all seven counts of fraud and conspiracy earlier this month. He is currently awaiting sentencing, which could result in up to 110 years in prison.

The bodies of the latest crypto winter are nearly buried, and it looks like there are higher prices ahead for the major tokens. Bitcoin almost hit the 40k handle this week, and ETH blasted past the 2k mark. One wonders where this rally will end.