The bankruptcy plan for Celsius has received approval, allowing clients to recover some of their funds and obtain shares in the restructured entity, now named NewCo. Judge Martin Glenn of the Bankruptcy Court for the Southern District of New York confirmed the overwhelming support from Celsius' creditors on September 27. As part of the plan, around $2 billion worth of Bitcoin and Ethereum will be redistributed to Celsius creditors alongside equity in NewCo. The company aims to commence repayments to creditors by the end of this year.
A significant portion of Celsius creditors are participants in the Earn program, which enables them to earn weekly rewards by holding CEL tokens locked for a year. Judge Glenn's decision clarified that the Confirmation Order or the Program should not be viewed as a court determination on whether CEL Tokens or the Earning Program qualify as securities under securities laws. The SEC has previously asserted that comparable arrangements constitute securities.
NewCo will oversee the expansion of Celsius' former cryptocurrency lending operations, including the enhancement of existing mining activities. It will also work on monetizing illiquid Celsius assets and engaging in other developmental endeavors, contingent on regulatory approvals. The management of NewCo will be entrusted to the Fahrenheit Consortium, comprised of crypto-native individuals and organizations. Proof Group, a member of the consortium, is reportedly bidding for FTX.
Celsius declared bankruptcy in July 2022, with former CEO Alex Mashinsky facing charges of securities fraud, commodities fraud, and wire fraud. Mashinsky, who was arrested in July 2023, is scheduled to stand trial in September 2024 and is currently free on $40 million bail. Additionally, the former Celsius chief revenue officer, Roni Cohen-Pavon, has pleaded guilty to fraud and price-fixing charges, with sentencing set for December 11.
