The Bankruptcy Court approved the compensation plan presented by Celsius at the beginning of October, so the company will be able to begin compensating those affected in the coming days. It remains to be seen whether the SEC fully agrees.
The New York bankruptcy court approved Celsius Network’s restructuring plan, effectively allowing the cryptocurrency lending platform to emerge from bankruptcy.
Meanwhile, the US Securities and Exchange Commission (SEC) has yet to give the green light to the company’s new bitcoin mining venture.
Thus, the cryptocurrency-based financial services company that suspended operations last year, Celsius Network, will apparently be able to emerge from bankruptcy after the approval of its new compensation plan by the respective court.
Celsius Comes Out of Bankruptcy
More than a year after filing for Chapter 11 bankruptcy and freezing its clients’ funds, Celsius will now be able to move forward with its restructuring and repayment plan following an order from Judge Martin Glenn of the United States Bankruptcy Court, Southern District of New York.
According to an excerpt of the court ruling, Judge Glenn said: “The Plan is confirmed pursuant to section 1129 of the Bankruptcy Code.” The court approval marks a significant development for the company, which experienced a liquidity crisis and collapsed in 2022.
Celsius’ restructuring plan proposes transitioning to a new creditor-owned bitcoin mining entity called NewCo and involves redistributing $2 billion in BTC and ETH to clients, along with shares in the newly created company,
A consortium made up of a group of companies, including Coinbase, called Fahrenheit LLC, will manage NewCo. As CriptoPatata previously reported, the majority of Celsius’ creditors voted in favor of the plan.
Despite the latest developments, NewCo will need approval from the SEC, according to a Bloomberg report. Judge Glenn previously asked the US securities regulator to decide whether or not the agency will give the green light to Celsius’ plan.
The new entity under which Celsius will be taken over, NewCo, plans to distribute some USD $450 million in initial financing, and subsequently release the rest of the funds based on the schedule proposed in the contemplated plan.
Meanwhile, if the bitcoin mining plan fails, the cryptocurrency lender may go into liquidation, according to the report.
Alex Mashinsky Will Be Tried in 2024
As it may be recalled, US authorities captured and frozen the funds of its former CEO, Alex Mashinsky, who faces fraud charges brought by the SEC and the CFTC.
With Celsius cleared to emerge from bankruptcy, the company’s former CEO Alex Mashinsky will stand trial in September 2024. Mashinsky, accused of defrauding Celsius customers and manipulating the value of the platform’s native currency, CEL , was arrested in July 2023 and later released on $40 million bail.
However, the former Celsius boss denied the allegations leveled against him by the US Federal Trade Commission (FTC) and SEC and pleaded not guilty.
Unlike Mashinsky, another former Celsius executive, Roni Cohen-Pavon, pleaded guilty to the criminal charges against him and is working with investigators.
Meanwhile, the cryptocurrency lender reached an agreement with the FTC to pay a $4.7 billion fine, and the company and its entities were prohibited from handling customer funds.
Although SEC authorization is lacking, the move officially makes Celsius the first crypto platform to compensate its clients, as well as associates among those that filed for bankruptcy between 2022 and 2023, following harsh market conditions.
By Leonardo Perez
