The approved plan allows Celsius to distribute approximately $2 billion worth of Bitcoin (BTC) and Ethereum (ETH) and some shares of the new company to users who were unable to withdraw their funds
The Celsius bankruptcy plan has been approved. The path is now clear for customers to see some of their funds returned and receive shares in the reorganized company, which will be called NewCo.
The Celsius insolvency case, which began last year, has taken a significant step forward with the approval of the company’s restructuring plan by the US Bankruptcy Court for the Southern District of New York. On November 9th, Judge Martin Glenn approved the defunct crypto company’s proposal, which was also supported by many creditors.
Celsius Network declared bankruptcy in 2022 after months of struggling with liquidity issues. The main issue arose following the Luna crash, which impacted many crypto businesses. Many users began withdrawing their funds for fear of losing them, putting the company in an unstable situation and forcing it to declare bankruptcy within two weeks of the crash. Its total assets and liabilities were estimated to be between $1 million and $10 million, with over 100,000 creditors.
Celsius Bankruptcy: The Plan to Address the Situation
The approved plan allows Celsius to distribute approximately $2 billion worth of Bitcoin (BTC) and Ethereum (ETH) and some shares of the new company to users who were unable to withdraw their funds when the company stopped accepting withdrawal requests, many of whom were participants in the Celsius Earn program, which paid them a set amount as a reward for depositing their cryptos. Although the Securities and Exchange Commission contends that such programs are subject to securities regulation because they provide some return to users, the judge did not resolve the issue. He did not ascertain the program’s current status or whether it constitutes security.
Celsius will be reorganized into a new entity called NewCo, which will try to monetize its assets and experiment with a new business model while waiting for regulatory approval. According to reports, the company intends to concentrate on mining Bitcoin and collecting fees from staking validators. It will also be controlled by Fahrenheit LLC, a group of entities already involved in cryptocurrency. Fahrenheit will purchase the majority of the company’s shares for around $50 million, after which the company will go public on the Nasdaq. This will allow customers to be able to sell the shares they receive as part of the bankruptcy recovery process.
Court Cases against Celsius Founder
Alex Mashinsky, the founder of Celsius, has been charged with seven counts of offenses, including securities fraud, wire fraud, and connections to multibillion-dollar fraud and market manipulation. He was also said to have allied with the company’s former chief revenue officer, Roni Cohen-Pavon, to manipulate the company’s crypto token in what was described as a Ponzi-like scheme. NewCo, the rebranded company, also intends to file a lawsuit against Celsius’ founder.