Celsius Network Creditors Vote in Support of $2 Billion Restructuring

Celsius Network restructuring plans received overwhelming support as the majority of creditors voted in support of the proposed reorganization. The approval granted by the creditor groups positions the insolvent crypto lender on a course to settle the claims. 

Through a Monday September 25 court filing, Celsius Network revealed the overwhelming support the creditors expressed in their vote to approve the reorganization plan. In particular, Celsius Network submitted that 98% of the creditors support the restructuring as proposed. The insolvent crypto lender proposes to settle 67% to 85% of the creditors’ investments.

Celsius Network Creditors Receiving Equity in NewCo

The reorganization plan will see Celsius’ creditors receive equity compensation within the newly established entity tentatively identified as NewCo. The proposal details are captured in the voting declaration submitted on Monday by the restructuring agency Stretto to the US bankruptcy court for approval.

The creditors approved the reorganization proposal despite the heightened objections posed by the US Trustee. The entity was justified in raising concerns about the proposal, given it is backed by the Justice Department to oversee the administration of such bankruptcy cases. Also, it exercises DOJ-backed oversight of private trustees engaging in bankruptcy cases. 

Celsius Network indicated waiting for the Southern District Bankruptcy Court in New York to approve the final confirmation of the proposal’s implementation. As such, the court scheduled a hearing on Monday, October 2.  

The proposed plan features the disclosures made on August 17 that it intends to distribute Bitcoin and Ethereum valued at $2 billion to the Celsius Network’s creditors.

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Celsius Networks Edges Closer to Handing Over to NewCo

The disclosure identified NewCo as the envisioned platform to pursue the expansion of the insolvent crypto lender’s Bitcoin mining operations. NewCo will facilitate holding stakes in Ethereum and liquidating assets owned by the debtors engaged in bankruptcy proceedings. Its establishment will allow the exploration of business opportunities while complying with the regulatory requirements.

The submission revealed that a management team drawn from the Fahrenheit Group would oversee NewCo. The Group had, in May 2023, submitted a successful bid to purchase Celsius Network. 

The August 17 disclosure revealed that Fahrenheit will offer the requisite capital, technology, and management team needed to start and run the new public entity while complying with relevant regulations. 

The Group is counting on support from mining firm US Bitcoin Corp and Algorand ex-boss Steven Kokinos. Also, the Group will draw input from venture capitalist Proof Group Capital Management (PGCM) and Arrington Capital.

Celsius Progressive March From Bankruptcy

The approval of restructuring plans by Celsius Network creditors places the crypto lender on a path to reclaim its lost glory. A revisit of the insolvent crypto lender reveals its past dominant position in the global crypto ecosystem. In particular, the crypto firm was in October 2021 overseeing assets valued at $25 billion.

Celsius Network earned its reputation by allowing users to deposit various cryptos such as Ethereum and Bitcoin. The process allowed users to earn interest and obtain loans advanced on their crypto deposits as collateral.  

Celsius would in last year plunge into bankruptcy following the crypto market downturn. Its former chief executive, Alex Mashinsky, would later be arrested in July, 12 months after the crypto lender business went bust. Nonetheless, Mashinsky would agree to a $40 million recognizance bond for his release.

The resounding support offered by creditors in the vote portrays a significant milestone in the lender’s bankruptcy proceedings. It facilitates a process for structured and equitable resolution of the bankruptcy proceedings, guaranteeing benefits to all stakeholders. 

SEC’s Objections to Coinbase’s Selection as Distribution Agent 

The news of creditors voting to approve the proposed restructuring plans comes after the US Securities and Exchange Commission (SEC) voiced its objections to the plan. 

The Gary Gensler-led SEC opposes Celsius’ plan to utilize crypto exchange Coinbase as the distribution agent for the returns to international customers. 

SEC submitted that it charged Coinbase in June this year, where the distribution agent role would implicate multiple concerns alleged in the lawsuit.  

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