- Celsius Network is set to exit bankruptcy after the case judge signed off on its plans
- The bankrupt lending wants to pivot to being a crypto mining and staking company
- Novawulf Digital Capital bought Celsius in February
Celsius Network is set to exit bankruptcy following the approval of its customer repayment plan by a Delaware bankruptcy court. The plan, outlined on October 2, involves creating a new entity named NewCo with $450 million in seed funding which will be owned by Celsius’ former customers and creditors. NewCo, which will be under the management of the Fahrenheit Group which won the bid to acquire Celsius, will focus on Bitcoin mining and staking, with the aim of becoming a publicly traded company listed on the Nasdaq. Celsius collapsed into bankruptcy in June last year, a collapse which helped precipitate the bear market.
$2 Billion to be Handed Back to Customers
Celsius, led by indicted former CEO Alex Mashinsky, collapsed alongside other crypto firms amid a market downturn last summer, having had $25 billion in assets under management in October 2021. Mashinsky faces criminal charges and civil lawsuits related to his conduct at Celsius, which could see him spend decades behind bars.
Celsius’ bankruptcy plans were cemented earlier this year following discussions with creditors over the best way to proceed, with Novawulf Digital Management selected in February as the company to guide the reformed lender out of bankruptcy. This was followed in March by the news that creditors would receive up to 72.5% of their claims, provided they didn’t try to sue the company.
The final plan includes the distribution of at least $2 billion in cryptocurrency to creditors, which should commence early next year.
SEC Could Scupper Plans
Celsius’s plan to transform itself into a crypto mining company has been met with skepticism from some of its customers and still faces regulatory hurdles, with NewCo needing to be approved by the US Securities and Exchange Commission (SEC). Should they fail, Celsius could pivot to liquidation, which could happen if the SEC decides to challenge transactions involving crypto tokens it believes are securities.
US Bankruptcy Judge Martin Glenn approved the final plan without explicitly classifying digital assets as securities or commodities, leaving room for potential challenges by the SEC.
