By
Temitope Olatunji
April 26th, 2024
Celsius said it will initiate a controlled wind-down of operations by February 28, 2024. The crypto lender will discontinue its mobile and web applications.
Celsius Network, a prominent cryptocurrency lender, has risen from the dust after 18 months of bankruptcy. In an official press release on January 31, 2024, the company said it had successfully exited Chapter 11 bankruptcy.
It is now set to begin distributing over $3 billion in crypto and fiat currency to repay creditors.
Celsius Receives Approval to Exit Bankruptcy
Celsius received approval from its official committee of unsecured creditors (UCC) to transition into MiningCo Transactions as part of its exit bankruptcy strategy. The company also secured a green light from the bankruptcy court on December 27, 2023, to start operations under the new company.
The crypto lender has also launched a new venture in the form of Ionic Digital, a Bitcoin (BTC) mining enterprise, as part of its bankruptcy exit strategy to be owned by Celsius creditors.
According to the release, Hut 8, one of the leading BTC mining companies in the industry, will oversee the operations of the new company created by Celsius. Matt Prusak, the chief commercial officer at Hut 8, will also assume the CEO role at Ionic Digital.
In December 2023, Celsius entered into an interim agreement with Hut 8 to create a BTC mining firm in Cedarvale, Texas. Coinspeaker reported that the collaboration is a “key component of Celsius bankruptcy proceedings”. Following the company’s bankruptcy exit, the venture has now materialized as Ionic Digital.
The exit from insolvency comes after Celsius’s restructuring plan, which garnered approval from approximately 98% of the company’s account holders. The plan, confirmed by the United States Bankruptcy Court for the Southern District of New York in November last year, focuses on the distribution of assets and establishing Ionic Digital.
Celsius Generates $250M to Add to Distribution Pool
The company generated $250 million to add to the funds available for distribution. The funds were obtained by converting its crypto holdings to Bitcoin (BTC) and Ethereum (ETH).
Additionally, Celsius raised part of the funds through previous settlements to enhance the amount available for distribution.
The distributions commenced on Wednesday and will be made to creditors through popular payment platforms like PayPal, Venmo, and the American crypto exchange Coinbase.
“Creating the best outcome for creditors by maximizing value and speed has been front of mind for Celsius throughout this process. Today, over 18 months after Celsius paused withdrawals, we began distributing over $3 billion of cryptocurrency, fiat, and stock in Ionic Digital to Celsius creditors,” said Chris Ferraro, the former chief restructuring officer at Celsius.
Celsius to Shut Down Certain Operations
Celsius said it will initiate a controlled wind-down of operations by February 28, 2024. The crypto lender will discontinue its mobile and web applications. The move is part of the company’s commitment to honoring withdrawal obligations and optimizing its position in response to the financial challenges faced in 2022.
The company hit rock bottom following a liquidity crisis that sent its native token (CEL) to a new low two years ago. In June 2022, the crypto lender halted all withdrawals, transfers, and swaps from its platform, citing “extreme market conditions”. Celsius claimed the move would “put it in a better position to honor, over time, its withdrawal obligations”.
Following the pause, the company filed for bankruptcy protection in July 2022, which saw the firm pay a $4.7 billion fine to the United States Federal Trade Commission (FTC) for settlements and to enable Celsius to return its remaining funds to users.
Celsius’s woes continued last year through July when the United States government arrested its former CEO Alex Mashinsky on charges of fraud and market manipulation of CEL’s prices. Federal prosecutors also accused him of violating commodities and securities laws in the US.
Despite these challenges, the crypto lender has cleaned up and made a comeback after 18 months of lengthy bankruptcy proceedings. David Barse and Alan Carr, members of the Special Committee of the Board of Celsius overseeing Chapter 11 while reflecting on the journey, said that people thought Celsius would disappear from the market.
“Everyone assumed Celsius would disappear completely like the other crypto lenders that were filing bankruptcy around the same time. Our exit from bankruptcy is the culmination of an extraordinary team effort,” they said.