Celsius Network filed for Chapter 11 bankruptcy protection in April 2022, hoping to restructure its debt and find a buyer for its assets.
Celsius Network, the bankrupt crypto lending company, has taken a significant step forward in prioritizing the needs of its creditors. The company is currently seeking court approval to efficiently distribute payments to its creditors before the year comes to an end. This proposed plan showcases Celsius’ commitment to transparency and efficiency in serving its creditors across the board.
The New Deal for Celsius Network Creditors
According to an opening statement at the confirmation hearing in New York, Celsius’ legal counsel, Christopher Koenig, said the company aims to establish a new entity called NewCo, which is primarily focused on Bitcoin (BTC) mining and staking activities. To propel this venture, NewCo will receive an impressive $450 million in seed funding and will be owned by Celsius’ customers but managed by Fahrenheit, the consortium that acquired the company.
Notably, if Celsius’s plan is approved, it would be the first failed crypto platform from 2022 to be revived in a Chapter 11 bankruptcy case.
Meanwhile, the decision to create a new entity demonstrates the embattled crypto lender’s dedication to adaptability and forward-thinking, and will also ensure enhanced financial stability for its creditors. It also allows for a more efficient allocation of resources as the plan includes giving out approximately $2 billion worth of BTC and Ethereum (ETH) to existing creditors.
Undoubtedly, the frozen funds issue arose as a consequence of the challenges faced by Celsius, and NewCo’s commitment to resolving it stands as a testament to responsible succession planning. Recognizing the financial burden placed on customers, NewCo views the repayment initiative as the optimal recovery option, prioritizing the restoration of customers’ financial assets.
Also, the repayment plan signifies a strategic move by NewCo to differentiate itself from the past troubles of the insolvent crypto lender. The successor company understands the significance of fostering a positive reputation, and addressing the financial grievances of affected customers is a crucial step toward rebuilding trust and credibility.
However, individual creditors have voiced displeasure over Celsius’ repayment plan. They think that they are being forced to take an equity stake in a risky new company.
Celsius’ Journey Out of Bankruptcy
Celsius Network filed for Chapter 11 bankruptcy protection in April 2022, hoping to restructure its debt and find a buyer for its assets. In October, the company launched an auction for its assets. Following several bids, Fahrenheit emerged as a winning bidder for Celsius’ assets in May 2023. Fahrenheit offered to pay $300 million in cash and $700 million in Fahrenheit tokens for the company’s assets.
However, in a recent development, Celsius submitted an update to its bankruptcy exit plan. The new plan states that customers who have deposited or borrowed fiat currencies will not receive any recovery from Celsius or Fahrenheit, instead, they will have to file claims as unsecured creditors, a move that is fueling the discontent from creditors for the new deal.
Benjamin Godfrey is a blockchain enthusiast and journalist who relishes writing about the real life applications of blockchain technology and innovations to drive general acceptance and worldwide integration of the emerging technology. His desire to educate people about cryptocurrencies inspires his contributions to renowned blockchain media and sites.