Celsius Network’s Bitcoin mining plan wins court approval

U.S. Bankruptcy Judge Martin Glenn in Manhattan has approved cryptocurrency lending company Celsius Network’s shift to a publicly traded bitcoin mining shop.

The ruling, which was handed down on Wednesday, December 27, allows the company to deviate from its previously approved bankruptcy plan, finding that the new restructuring does not put creditors and customers in a disadvantageous position.

Celsius filed for Chapter 11 protection in July 2022, joining other crypto lenders who went bankrupt after experiencing rapid growth during the COVID-19 pandemic.

The bankruptcy plan, initially approved in November, was flexible enough to accommodate Celsius’ switch to a backup plan when it faced challenges with the U.S. Securities and Exchange Commission (SEC).

Having to modify its plans, Celsius stepped back from earning fees through validating crypto transactions and exploring new business lines.

Under new management

The change also led Celsius to part ways with some external bidders. Mining company US Bitcoin Corp, led by Hut 8’s Asher Genoot, now manages the new creditor-owned mining business. Initially, U.S. Bitcoin Corp was part of a consortium of bidders called “Fahrenheit,” alongside Arrington Capital.

Some creditors and the U.S. Department of Justice’s bankruptcy watchdog argued that this change was significant enough to necessitate a new vote by creditors.

However, while Judge Glenn was initially sympathetic to this argument, saying during a November 30 court hearing that the mining plan was “not the deal that the creditors voted on,” he ultimately approved the deal without requiring a new vote.

US Bitcoin Corp, founded by Hut 8’s Asher Genoot, was originally going to manage Celsius alongside other companies in a consortium of bidders, which included Arrington Capital and was collectively called “Fahrenheit.”

Celsius’ plan to return from bankruptcy

Celsius interim CEO Chris Ferraro said that December 27 was a “significant day” for Celsius’ creditors, owing to the approval from the court. He also remarked that the company’s focus on distributing cryptocurrency will continue to guide it.

Celsius expects to emerge from bankruptcy in early 2024, with the scaled-back bankruptcy plan freeing up $225 million in cryptocurrency assets originally intended for the rejected business lines.

As a result of this shift, more cryptocurrency from Celsius will be returned to customers, along with equity shares in the new bitcoin mining business, according to Glenn’s decision.