Celsius Emerges from Chapter 11 and Commences Distributions of Over $3 Billion of Cryptocurrency to Creditors
- None.
- Celsius will pursue an orderly wind down of its operations, including discontinuing the Celsius mobile and web applications.
Insights
The emergence of Celsius Network LLC from bankruptcy with a confirmed reorganization plan represents a significant event for the cryptocurrency industry, which has been characterized by volatility and regulatory scrutiny. The distribution of over $3 billion in cryptocurrency and fiat to creditors is a substantial liquidity event, which may impact the cryptocurrency market by increasing supply. The creation of Ionic Digital, Inc., a new Bitcoin mining entity, suggests a strategic pivot focusing on a more tangible asset-based operation within the crypto sector. This move could potentially stabilize the company's revenue streams, given that Bitcoin mining is a more predictable business compared to the high-risk lending operations previously conducted by Celsius.
The decision to convert altcoins to BTC or ETH to increase creditor payouts by nearly $250 million underscores the perceived stability and liquidity of these leading cryptocurrencies. The expected public trading of Ionic Digital stock will introduce a new investment vehicle to the market, which could attract both retail and institutional investors interested in cryptocurrency exposure without direct ownership of the assets. However, the success of this new venture will be contingent on the volatile dynamics of the Bitcoin mining industry, including energy costs, Bitcoin price fluctuations and competition.
The completion of Celsius' Chapter 11 process and the approval of the MiningCo Transaction by the Bankruptcy Court illustrate the evolving legal landscape surrounding cryptocurrency firms. The settlement with regulatory bodies like the DOJ, SEC and CFTC is pivotal, as it indicates Celsius' cooperation in addressing regulatory concerns and may set a precedent for how crypto companies navigate legal challenges. The creation of a litigation trust to pursue counterparties suggests a proactive approach to recovering assets and may deter future misconduct by other market participants.
The involvement of the Official Committee of Unsecured Creditors (UCC) in appointing a majority of the Board of Directors for Ionic Digital signals a shift towards creditor oversight in the management of the company, which could lead to more prudent governance. The orderly wind down of Celsius' operations, including the discontinuation of its mobile and web applications, indicates a clear departure from its previous business model and a focus on compliance and risk management in its new form as Ionic Digital.
The pivot to Bitcoin mining and the establishment of Ionic Digital could be seen as a strategic realignment within the crypto industry, which has been marred by trust issues and regulatory crackdowns. This new direction may restore some investor confidence, particularly if Ionic Digital can demonstrate operational efficiency and profitability in the competitive Bitcoin mining market. The fact that the new company will be owned by Celsius' creditors and managed by Hut 8 Corp, a recognized entity in the mining space, could provide additional credibility and operational expertise.
It is important to monitor how the market reacts to the availability of Ionic Digital stock once it becomes publicly traded. The performance of this stock could serve as a barometer for the market's perception of the long-term viability of cryptocurrency mining as a business, especially in the context of the broader digital currency ecosystem. Investors will be looking for indicators such as cost management, energy sourcing and the company's ability to adapt to the changing regulatory and technological landscape.
New Bitcoin Mining Company (Ionic Digital, Inc.) Owned by Account Holders
Following confirmation of the Plan and feedback from the Securities and Exchange Commission (the “SEC”) on certain aspects of the Plan, Celsius, in close coordination with the Official Committee of Unsecured Creditors (the “UCC”), announced that it would transition to the “MiningCo Transaction,” consistent with the Plan. In addition, the Company increased the amount of cryptocurrency that would be available for distribution to creditors by nearly
Today, pursuant to the MiningCo Transaction, the Company has commenced distributions of over
“Creating the best outcome for creditors by maximizing value and speed have been front of mind for Celsius throughout this process,” said Chris Ferraro, Plan Administrator and former Chief Restructuring Officer, Interim Chief Executive Officer, and Chief Financial Officer. “Today, over 18 months after Celsius paused withdrawals, we began distributing over
“Our exit from bankruptcy is the culmination of an extraordinary team effort and extensive collaboration between Celsius, Hut 8, strategic partners, and our creditors," added David Barse and Alan Carr, members of the Special Committee of the Board of Celsius, who have been steering Celsius though its Chapter 11 process. Barse and Carr continued: “When we were appointed in June 2022, everyone assumed Celsius would disappear completely like the other crypto lenders that were filing bankruptcy around the same time. We, however, believed that Celsius could navigate complicated legal, regulatory, and business issues. Among other achievements, Celsius secured the cryptocurrency on our platform, achieved a settlement with the preferred shareholders, ran a successful auction of the one reorganizable operating business to begin as a new Bitcoin mining company, established a litigation trust to pursue the innumerable counterparties that exploited Celsius and, possibly most importantly, settled with the DOJ, SEC, and CFTC. But most of all, we are proud of the preservation and distribution of cryptocurrency assets and enhanced recovery for customers and claim holders.”
To facilitate secure, timely, and fully compliant distributions, Celsius and its advisors have coordinated with the UCC and certain federal and state regulatory agencies throughout its restructuring.
Matt Prusak, Chief Commercial Officer, Hut 8, has been named CEO of Ionic Digital and will work with the previously announced Board of Directors, a majority of which were appointed by the UCC. Hut 8 will oversee Ionic Digital’s Bitcoin mining business under a four-year management agreement. Additional details on Ionic Digital will be forthcoming.
Celsius will now pursue an orderly wind down of its operations, including discontinuing the Celsius mobile and web applications.
Additional Information about the Restructuring Process
The full terms of the Plan and Disclosure Statement, as well as additional information about the chapter 11 filing, including court documents, can be found online free of charge at https://cases.stretto.com/celsius. Stakeholders with questions may call Stretto at +1 (855) 423-1530 (
Advisors
Kirkland & Ellis LLP is serving as legal counsel, Centerview Partners is serving as financial advisor, Alvarez & Marsal is serving as restructuring advisor, and C Street Advisory Group is serving as strategy and communications advisor to the Debtors.
White & Case LLP is serving as legal counsel, Perella Weinberg Partners is serving as investment banker, and M3 Partners is serving as financial advisor to the Committee.
Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel to Ionic Digital.
Brown Rudnick LLP is serving as legal counsel to Hut 8.
About Celsius
Celsius is a global cryptocurrency platform and a well-recognized leader in Bitcoin mining. For additional information on the company, please visit http://www.celsius.network. For additional information on Celsius’ ongoing Chapter 11 cases, please visit http://www.cases.stretto.com/celsius.
View source version on businesswire.com: https://www.businesswire.com/news/home/20240131994097/en/
Media Inquiries
press@celsius.network
Source: Celsius Network LLC
FAQ
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