The restructuring plan of Celsius Network has been approved by the New York bankruptcy court, allowing the cryptocurrency lending platform to emerge from bankruptcy. The decision comes over a year after Celsius filed for Chapter 11 bankruptcy and suspended customer funds.
Judge Martin Glenn of the US Bankruptcy Court Southern District of New York issued the order, confirming the plan’s approval under section 1129 of the Bankruptcy Code. This marks a significant milestone for Celsius, which faced a liquidity crisis and collapsed in 2022.
The approved restructuring plan involves the transformation of Celsius into a new bitcoin mining entity named NewCo, owned by creditors. It includes the redistribution of $2 billion worth of BTC and ETH to customers, along with shares in the newly formed company. The management of NewCo will be handled by a consortium called Fahrenheit LLC, consisting of companies such as Coinbase, as reported earlier.
Despite this positive development, the new bitcoin mining firm, NewCo, still awaits approval from the US Securities and Exchange Commission (SEC), according to a Bloomberg report. Judge Glenn had previously called on the SEC to determine whether to greenlight Celsius’ plan. If the SEC does not approve the bitcoin mining initiative, Celsius may be forced into liquidation.
Following the approval of Celsius’s exit from bankruptcy, the company’s former CEO, Alex Mashinsky, is set to stand trial in September 2024. Mashinsky faces accusations of defrauding Celsius customers and manipulating the value of the platform’s native coin, CEL. Despite his release on a $40 million bond, Mashinsky has denied all charges brought by the US Federal Trade Commission (FTC) and the SEC.
In contrast, another former Celsius executive, Roni Cohen-Pavon, has pleaded guilty to criminal charges and is cooperating with investigators. Additionally, Celsius reached a settlement with the FTC, agreeing to pay a $4.7 billion fine. The terms of the settlement also prohibit the firm and its entities from handling customer funds.
