Celsius emerging from bankruptcy and announcing that it has started making repayments of over $3 billion to creditors has been a surprising development.
Crypto lender Celsius shared some remarkable news after the firm announced that it has successfully exited bankruptcy and reimbursed $3 billion to its creditors.
It took Celsius almost 18 months to dig itself out of the bankruptcy hole, an impressive feat considering how badly it was affected following the crypto market crash caused by the implosion of Terraform Labs. The firm was forced to halt withdrawals and later declare bankruptcy in 2022.
However, the firm recently announced that it has successfully exited the Chapter 11 bankruptcy proceedings in the United States and has also signaled the commencement of the distribution of $3 billion in cryptocurrency and fiat to its creditors.
The firm has also announced that it has started a new venture called Ionic Digital, which is a Bitcoin mining venture.
Hut 8 will oversee the management of Ionic Digital, with the leadership role entrusted to Matt Prusak, the Chief Commercial Officer of Hut 8, according to a press release issued on January 31.
For those who need to learn what Hut 8 is, it is a mining corporation operating as a cryptocurrency mining company, running large-scale bitcoin mining operations based in Canada.
The company offers investors a straightforward way to gain direct exposure to Bitcoin without navigating the technical intricacies or limitations of acquiring the cryptocurrency.
According to a press release, Hut 8 announced its commitment to delivering “end-to-end managed services” for five mining sites owned by Celsius in Texas.
In this arrangement, Matt Prusak will take on the role of CEO. The four-year agreement outlines a substantial commitment from Hut 8, including an annual management fee of $20 million and the provision of restricted stock and incentive equity in the newly established company.
Celsius has stated that the Ionic Digital firm will continue reimbursing funds to creditors, and the company’s stock is anticipated to be publicly traded once they obtain all the necessary approvals.
Celsius’ ambitious plan to dig itself out of its bankruptcy hole was approved by almost 98% of its creditors. The successful completion of the plan is an impressive feat, given the firm had to suspend withdrawal and spent 18 months figuring out how to repay its creditors.
Celsius also stated that it increased the amount of crypto available for distribution to its creditors by around $250 million. The company achieved this feat by successfully converting altcoins to BTC and ETH and using the funds the firm gained from previous settlements.
If you are wondering how converting altcoins to BTC and ETH helped increase reimbursement, here is a small explanation of how that is possible.
Bitcoin and Ethereum are generally more widely traded and liquid than many altcoins. By converting altcoins into BTC or ETH, Celsius can tap into larger, more liquid markets, making selling or distributing these assets easier.
Lastly, in an official court submission, Celsius disclosed its intention to conclude its operations and cease its mobile and web applications by February 28.
Creditor distributions will be facilitated through platforms like PayPal, Venmo, and Coinbase. Some creditors have already shared their claim forms on X(formerly Twitter).
Two members of the Celsius Board, David Barse and Alan Carr, highlighted the significant achievement Celsius has managed to attain while also addressing the critics who questioned whether or not Celsius would be able to fulfill their obligation and reimburse the affected parties.
Barse stated: “Everyone assumed Celsius would disappear completely like the other crypto lenders that were filing bankruptcy around the same time. Our exit from bankruptcy is the culmination of an extraordinary team effort.”
When Celsius temporarily halted withdrawals in 2022, the company asserted that the decision was made to strategically put itself in a position from which it could gradually fulfill its withdrawal commitments. The move followed a significant drop in the value of its native token, Celsius (CEL), in 2022.
As part of the bankruptcy proceedings, Celsius reached settlements amounting to $4.7 billion with various regulatory entities, including the United States Federal Trade Commission. Additional settlements were reached with the Department of Justice, the Securities and Exchange Commission, and the Commodity Futures Trading Commission.
While the news of Celsius exiting its Chapter 11 bankruptcy would certainly elevate the mode of people associated with the organization, its former CEO, Alex Mashinsky, might still not celebrate the news since he is currently awaiting a trial for his role in the bankruptcy episode.
Mashinsky was arrested and charged by federal prosecutors for committing various financial fraud activities along with manipulating CEL’s price and misleading the firm’s customer base. Mashinsky has denied these allegations and pleaded not guilty to the charges against him.
He is out on bail after posting a $40 million bond, and his trial is pending until September.
