Cryptocurrency platform Celsius Network has won permission to end its bankruptcy case.
And with that approval, the company can now return most of the remaining crypto back to its hundreds of thousands of customers, the Wall Street Journal (WSJ) reported Thursday (Nov. 9).
The report noted that the plan OK’d by the bankruptcy court also establishes a new company around Celsius’s crypto mining and staking activities, putting an end to a unique bankruptcy case that saw individual customers deeply involved and fighting to influence the outcome.
As PYMNTS wrote last month, this marks the first time a failed crypto platform was reborn in Chapter 11 after a series of insolvencies in the industry last year.
According to the WSJ, customers are expected to receive just a small piece of what they deposited when Celsius froze their accounts last year. At the time, the company had a $1.2 billion deficit, making it one of the crypto sector’s largest collapses.
Celsius has said its new company would be seeded with $450 million in capital and financial backing from a consortium named Fahrenheit LLC.
The plan faces opposition from customers whose funds were locked on the platform. An affiliate of Lantern Ventures, claiming it was owed around $82 million, also fought the plan, arguing that Celsius’ advisors had overvalued the new business.
Celsius initially paused customer withdrawals in June 2022 due to a downturn in crypto prices and subsequently filed for bankruptcy. The company was among several crypto platforms beset by financial difficulties, including failed crypto hedge fund Three Arrows Capital, lender BlockFi Inc., and FTX, led by Sam Bankman-Fried.
Celsius founder and former CEO Alex Mashinsky was charged earlier this year with fraud by the federal government and sued by three different federal regulators in connection with the company’s collapse.
Among them was the Federal Trade Commission (FTC), which announced a settlement with the company that permanently bars it from handling customers’ funds.
“Celsius touted a new business model but engaged in an old-fashioned swindle,” FTC Bureau of Consumer Protection Director Samuel Levine said in a news release.
With the end of Celsius’ bankruptcy case, the WSJ said, nearly all the major U.S. crypto firms that went bankrupt during last year’s market collapse have finished court proceedings and begun repaying customers.
One major case still remains, that of FTX. That company, as noted here Wednesday (Nov. 8), has received bids from three different prospective suitors and is expected to emerge from bankruptcy next year.