Celsius Bankruptcy Exit Approved: Users to Recover $2 Billion in Crypto as NewCo Emerges

Remember the crypto storm of 2022? One of the biggest names caught in the whirlwind was Celsius Network. If you had funds stuck in Celsius, there’s finally some light at the end of the tunnel. After a long and anxious wait, the Celsius bankruptcy plan has been given the green light! Let’s break down what this means for you and the future of Celsius, now reborn as ‘NewCo’.

Celsius Bankruptcy Exit: What’s Actually Happening?

Big news dropped on November 9th! Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York officially approved Celsius’s reorganization plan. This is a major step forward in the insolvency case that began last year, offering a path for Celsius to emerge from bankruptcy and return some assets to its users. Creditors largely supported this plan, signaling a collective sigh of relief in the crypto community.

To understand the significance, let’s rewind a bit. Celsius Network, once a popular crypto lending platform, buckled under immense pressure and declared bankruptcy in 2022. The domino effect from the Luna crash significantly impacted numerous crypto firms, and Celsius was no exception. As fear gripped the market, users rushed to withdraw their funds, creating a liquidity crisis that ultimately led to Celsius’s downfall. Within just two weeks of the initial crisis, bankruptcy was declared. At the time, Celsius reported assets and liabilities estimated between $1 million and $10 million, and faced over 100,000 creditors. It was a chaotic time, to say the least.

The Rescue Plan: How Will Users Get Their Money Back?

So, what does this approved plan actually mean for Celsius users who had their funds locked up? Here’s the crux of it:

• Asset Distribution: Celsius is now authorized to distribute approximately $2 billion worth of Bitcoin (BTC) and Ethereum (ETH). This is a significant step towards repaying users.
• NewCo Shares: In addition to crypto, users will also receive shares in ‘NewCo’, the newly formed company emerging from the Celsius ashes.
• Who Benefits? This primarily impacts users who were unable to withdraw their funds when Celsius froze withdrawals. Many of these users were participants in the Celsius Earn program, which promised rewards for depositing crypto.

Read Also: Celsius Cleared To Exit Bankruptcy And Reopens As A Mining Business

Interestingly, the Securities and Exchange Commission (SEC) has raised concerns about programs like Celsius Earn, suggesting they might fall under securities regulations due to the promised returns. However, Judge Glenn didn’t make a definitive ruling on this aspect, leaving the regulatory status of such programs for another day.

Enter NewCo: Celsius’s Second Act?

Celsius isn’t simply dissolving; it’s being reborn as NewCo. The focus of NewCo will be to monetize existing Celsius assets and explore a revised business model. The initial strategy? Bitcoin mining and earning fees from staking validators. Essentially, NewCo is pivoting towards activities directly involved in the crypto ecosystem’s infrastructure.

Key to this transformation is Fahrenheit LLC, a consortium of crypto-focused organizations. Fahrenheit is set to acquire a majority stake in NewCo for around $50 million. Here’s the exciting part for users: NewCo is aiming to become a publicly listed company on the Nasdaq! This public listing is crucial because it will allow users who receive NewCo shares as part of the bankruptcy recovery to potentially sell those shares on the open market, providing further liquidity and recovery options.

Legal Battles Still Loom: The Case Against Alex Mashinsky

While the bankruptcy plan offers a path forward, the legal saga surrounding Celsius and its leadership is far from over. Celsius founder, Alex Mashinsky, faces serious accusations, including seven counts of securities fraud, wire fraud, and involvement in multibillion-dollar fraud and market manipulation. He’s also accused of collaborating with former chief revenue officer, Roni Cohen-Pavon, in a Ponzi-like scheme to manipulate Celsius’s own cryptocurrency.

Adding another layer to the legal drama, NewCo itself plans to pursue legal action against Alex Mashinsky. This indicates that the new management is keen to distance itself from the past controversies and potentially recover further assets for creditors.

The Road Ahead for Celsius Users and NewCo

The approval of the bankruptcy plan is undoubtedly a positive step for Celsius users. It marks a tangible move towards recovering a portion of their lost funds, both in crypto assets and through shares in NewCo. However, it’s crucial to remember:

• Recovery is Partial: Users likely won’t recover 100% of their initial deposits. Bankruptcy proceedings rarely result in full restitution.
• NewCo Shares Value: The actual value of NewCo shares remains to be seen and will depend on NewCo’s performance and market conditions after going public.
• Ongoing Legal Processes: The legal cases against Alex Mashinsky and potentially others will continue to unfold, and their outcomes could further impact the Celsius situation.

Despite these uncertainties, the Celsius bankruptcy exit plan offers a sense of closure and a pathway to recovery for affected users. The emergence of NewCo signifies an attempt to rebuild and learn from the mistakes of the past. As the crypto landscape continues to evolve, the Celsius case serves as a stark reminder of the risks involved and the importance of regulatory clarity and responsible financial practices within the industry. Keep an eye on NewCo – its journey from the ashes of Celsius will be a story worth following.