Celsius Set to Exit Bankruptcy After the Court Approved its Reorganization Plan

In an official communication, the New Jersey-based crypto lender Celsius Network received the approval of a restructuring plan from a bankruptcy court in Delaware. Since last year, the disgraced crypto lender has been pursuing ways to return the customer’s funds and revive its operation.

The report indicates that Celsius Network filed for bankruptcy protection in 2022, citing the hostile market condition. Shortly after liquidation, the troubled crypto lender halted customers’ withdrawals due to the prolonged crypto winter that affected the overall market performance of crypto assets.

Court Approves Celsius Restructuring Plan

This decisive move attracted regulators’ attention to probe the legality of Celsius product offerings, including interest-bearing accounts and personal loans, among other services. In an earlier publication, around $4.4 billion was locked on Celsius interest-bearing accounts.

The suspension of withdrawal on the interest-bearing accounts affected around 600,000 customers. The regulatory action aimed at silencing the criticism from the affected Celsius customers.

Besides assessing the conformity of Celsius product offerings, the government watchdogs focus on investigating the business practices of the now-defunct crypto lender. In their finding, the regulators noted that Celsius’ top executives, including the chief executive Alex Mashinksy, engage in fraud and price manipulation practices contravening with the securities and federal regulations.

Celsius Battling Fraud and Price Manipulation Charges

These charges forced Celsius to settle a court fine amounting to around $4.7 billion. Consecutively, the Celsius CEO faced similar charges, and the court has scheduled September 2024 to begin Mashinsky criminal charges.

The court also instructed Mashisky’s bank account and assets he accumulated from real estate to be frozen. On the other hand, the former chief revenue officer at Celsius network, Roni Cohen-Pavon, was charged with price manipulation and involvement in a fraudulent scheme.

Mr. Cohen-Pavon is expected to appear before the court on December 11 for his arraignment. In response to the slew of charges facing Celsius, the developed a restructuring plan will address the legal charges against the failed crypto lender.

The restructuring plans have undergone a series of reviews to ensure conformity with the US law. Under the restructuring plan, the bankrupt crypto lender will establish a new entity called NewCo from a $450 million seed funding round.

The court report illustrated that NewCo’s primary focus will be on Bitcoin mining and staking services. The new entity will be owned by Celsius’ key stakeholders, including customers and creditors. The stakeholders will be required to support Fahrentium Group in steering the business towards a direction that attracts success.

Overview of Celsius Restructuring Plan

In May, the Fahrentium Group acquired Celsius network to support the crypto lender to exit bankruptcy. According to the acquisition deal, the Fahrentium Group was tasked to manage NewCo and support the new venture to maximize liquidity for creditors.

The crypto lender anticipates that NewCo will be publicly traded and will be listed under Nasdaq. A review of the revised restructuring plan submitted on October 2 demonstrates that the court approval will allow Celsius to return assets worth $2.03 billion to affected creditors.

The report revealed that from Q1 of 2024, Celsius will start repaying the customers. A review of the court judgment demonstrated that the recent restructuring plan captures the Celsius creditor’s request to receive 67% to 85% of their holdings. Judge Martin Glenn of the US Southern District of New York Bankruptcy Court approved the restructuring plan to allow the creditors to receive $0.25 per CEL token.

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