In a surprising turn of events, Celsius Network, the crypto lender that faced bankruptcy in July 2022, is set to distribute over $3 billion in cryptocurrency and fiat to its creditors as part of a comprehensive restructuring plan. The announcement, made on Wednesday, outlined the approval of the plan by an overwhelming 98 percent of Celsius’ account holders, following its clearance by the bankruptcy court in November.
related: Celsius Network’s Bold Promise: $2 Billion in Crypto Repayment by the Close of 2023
The reorganization plan not only involves a significant increase in the amount of cryptocurrencies allocated to creditors, totaling an additional $250 million, but it also introduces the creation of a new Bitcoin mining company named Ionic Digital. Celsius creditors will be granted a stake in this mining venture, ensuring a unique and innovative approach to debt recovery.
The distribution of cryptocurrencies will be managed by industry giants PayPal and Coinbase, who will oversee the allocation of funds to Celsius creditors. However, as part of the restructuring, Celsius will cease its operations, including its mobile and web applications, by February 28.
The development of Ionic Digital, to be operated by Hut 8 under a four-year management agreement, adds a new dimension to Celsius’ recovery strategy. Creditors will not only receive distributions but also have the opportunity to own equity in the mining company as common stockholders. Matt Prusak, Chief Commercial Officer of Hut 8, has been appointed as the CEO of Ionic Digital, bringing valuable expertise to the newly formed entity.
The turnaround for Celsius is a testament to the resilience and determination of its leadership. David Barse and Alan Carr, members of the Special Committee of the Board of Celsius, expressed optimism about the company’s ability to navigate complex legal, regulatory, and business challenges.
“When we were appointed in June 2022, everyone assumed Celsius would disappear completely like other crypto lenders facing bankruptcy. We, however, believed that Celsius could navigate complicated legal, regulatory, and business issues,” stated Barse and Carr.
The journey was not without its challenges, as Celsius faced fraud charges during the bankruptcy process. The company negotiated and settled with various U.S. enforcement agencies, including the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission. The settlement involved a payment of $4.7 billion, reflecting the company’s commitment to resolving legal issues and ensuring fair compensation for creditors.
Former CEO Alex Mashinsky, who was arrested on fraud charges, was later released on a $40 million bail bond. The successful resolution of legal matters and the preservation of cryptocurrency assets demonstrate Celsius’ dedication to enhancing recovery for its customers and claim holders.
The emergence of Celsius Network from bankruptcy paints a positive picture for the crypto lending industry, showcasing the potential for recovery and growth even in challenging circumstances. The creation of Ionic Digital and the unique distribution strategy underlines Celsius’ commitment to reshaping its future and delivering value to its stakeholders.