The failed cryptocurrency lender Celsius Network has been granted permission by a bankruptcy court to reorganize into a Bitcoin mining business owned by its creditors. This approval is a key component of a broader strategy designed to reimburse clients who have been unable to access their accounts for more than a year.
On Thursday, US Bankruptcy Judge Martin Glenn endorsed Celsius' restructuring plan. This plan involves compensating customers with a mix of cryptocurrency assets and shares in the new Bitcoin mining entity, which is set to go public. Celsius' attorneys have suggested that the asset distribution could start in early 2024.
This marks a pivotal moment for Celsius, which went bankrupt amid a crypto market slump. Despite fraud allegations against its executives, the company gained enough creditor support to overcome Chapter 11 bankruptcy. Former CEO Alex Mashinsky faces charges for allegedly manipulating the CEL token and providing misleading information to investors.
Celsius' transition to a crypto mining business faces skepticism and awaits SEC approval, with the risk of liquidation if unsuccessful. Judge Glenn urged the SEC for a quick decision on Celsius' plan to emerge from Chapter 11 as a listed Bitcoin mining firm. The court approved the plan after customers raised concerns about its costs and the undervaluation of the CEL token, intended for creditor distribution.
Celsius' lawyers argued that the CEL token was almost worthless at the time of its 2022 Chapter 11 filing, likening it to company stock which typically loses value in bankruptcy. Judge Glenn's approval of the bankruptcy plan avoided the complex legal question of whether the CEL token is a security, an issue with significant implications for U.S. cryptocurrency regulation. As Celsius transitions to a creditor-owned Bitcoin mining business, it faces regulatory hurdles and customer concerns, emphasizing the need for clear regulations in the evolving crypto industry.
