Celsius Network is reportedly seeking court approval on a bankruptcy exit plan that would allow it to restart as a user-owned bitcoin miner.
The failed crypto lender also aims to partially repay customers whose funds have been frozen on the platform since June 2022 by the end of this year, its lawyer said Monday (Oct. 2) during its bankruptcy hearing, Bloomberg reported Monday.
According to Celsius lawyer Christopher S. Koenig, the new company, expected to emerge from Chapter 11, will be seeded with $450 million in capital and financial backing from a consortium named Fahrenheit LLC. Led by investment firm Arrington Capital, Koenig said the consortium believes in the business and is committed to supporting its revival.
However, Celsius’s plan is facing opposition from some customers who have had their funds locked on the platform. An affiliate of Lantern Ventures, claiming to be owed around $82 million, is also challenging the plan, arguing that the new business has been overvalued by Celsius’s advisers. Additionally, regulatory clearance is required before the new venture can proceed.
If approved, this would be the first instance of a failed crypto platform being reborn in Chapter 11 after a series of insolvencies in the industry last year. However, court documents reveal the risk of liquidation if the new company fails, which would result in Celsius customers receiving less repayment.
As part of the bankruptcy plan, Celsius intends to partially repay its creditors by distributing approximately $2 billion in ethereum and bitcoin, as well as offering stock in the new company. Customers would also have a stake in litigation against co-founder and former CEO Alex Mashinsky and other former executives who have been charged with fraud by federal prosecutors. Mashinsky has pleaded not guilty to the charges.
Celsius initially paused customer withdrawals in June last year due to a downturn in crypto prices and subsequently filed for Chapter 11 bankruptcy. The company was among several crypto platforms that faced financial difficulties, including failed crypto hedge fund Three Arrows Capital, lender BlockFi Inc., and FTX, led by Sam Bankman-Fried.
In other recent news around the bankruptcy proceedings, PYMNTS reported on Sept. 25 that the Securities and Exchange Commission expressed reservations about Coinbase Global’s proposed involvement in Celsius Network’s plan to emerge from bankruptcy.
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