A U.S. bankruptcy judge recently indicated that Celsius Network might need to seek a fresh vote from its creditors regarding its plan to transition into a Bitcoin mining operation. During a recent court session, details were unveiled about the cryptocurrency lending platform's intention to exclusively focus on Bitcoin mining once it emerges from bankruptcy, adhering to regulatory advice to downsize its operations.
Judge Martin Glenn, presiding over Celsius Network’s Chapter 11 lawsuit, reportedly expressed discontent over the abrupt shift on November 30. He emphasized that he had previously advised Celsius about the crucial nature of reaching an agreement with the SEC and highlighted concerns about the significant deviation from the original deal that creditors had voted on.
Celsius Network had recently disclosed a revised post-bankruptcy strategy, narrowing its scope to Bitcoin mining, in response to the SEC's reservations about its initial business plans. Although the SEC did not outright oppose Celsius’ bankruptcy plan, it refrained from supporting cryptocurrency lending and staking activities that it had previously disapproved of.
Celsius’ attorney, Chris Koenig, argued during the November 30 hearing that the court-endorsed bankruptcy plan allows the company the flexibility to pivot toward a mining-specific business. Koenig contended that a new vote might not be necessary since the updated agreement would provide equivalent benefits to creditors.
However, two unrepresented clients raised objections in court documents, advocating for a complete liquidation of Celsius instead. The cryptocurrency lending platform filed for Chapter 11 protection in July 2022 amid the collapse of several cryptocurrency lenders during the COVID-19 pandemic, seeking reorganization under the bankruptcy laws.
The updated plan unveiled by Celsius is anticipated to release $225 million in cryptocurrency assets from the control of external investors, known as the Fahrenheit Syndicate. Under this proposal, Celsius creditors could expect a 67% recovery rate, an improvement from the previous 61.2% recovery rate under the prior Fahrenheit arrangement, as indicated in court records. Initially, Celsius’ post-bankruptcy Bitcoin mining initiative was slated to be managed by US Bitcoin Corp, in collaboration with Arrington Capital within the consortium.
