Bitcoin Mining Company Arises from Celsius Bankruptcy

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In a January 31 announcement, Celsius revealed its exit from bankruptcy, including establishing Ionic Digital, a Bitcoin mining company managed by crypto mining firm Hut 8. The newly formed company will be led by Hut 8 Chief Commercial Officer Matt Prusak.

With the completion of Celsius’ bankruptcy proceedings on Wednesday, $3 billion in crypto assets were distributed among creditors, as stated in a press release.

Ionic plans to operate 127,000 bitcoin mining machines at five locations in Texas. These mining rigs were acquired during the tenure of the former Celsius CEO, Alex Mashinsky, who is currently awaiting fraud trial. The newly formed company aims to go public, offering shares to Celsius creditors to recover their lost funds.

David Barse and Alan Carr, members of the board overseeing Celsius through bankruptcy, expressed their contentment. They emphasized that despite the general assumption that Celsius would fade away like other crypto lenders after bankruptcy, they believed in Celsius’s ability to navigate complex legal, regulatory, and business challenges.

They focused on the notable achievements: Celsius secured cryptocurrency on its platform, settled with preferred shareholders, conducted a successful auction for the reorganizable operating business now transitioning into a new Bitcoin mining company, established a litigation trust to pursue parties exploiting Celsius, and crucially, settled with the DOJ, SEC, and CFTC.

Celsius further revealed an augmentation of approximately $250 million in the crypto allocated for distribution to creditors, achieved by converting altcoins to BTC or ETH and through prior settlements. The company is now set to begin winding down its operations and will cease the functionality of its mobile and web applications. Creditors of Celsius will transition into shareholders of Ionic Digital, which is striving to go public soon. Prusak mentioned that the share distribution is underway but refrained from providing a specific timeline.

Story Behind Celsius’ Previous Downfall

Celsius’ bankruptcy filing occurred in July 2022 due to the liquidity crisis triggered by UST stablecoin’s abrupt collapse. Since then, the Celsius estate has been reorganizing its significant crypto holdings and devising a strategy for repaying over 100,000 creditors.

In November 2022, a judge in the Southern District of New York sanctioned a proposal allowing Celsius’s creditors to acquire crypto and stocks through a newly established bitcoin mining business. The execution phase was finalized by late December, allowing Ionic Digital to receive the former Celsius mining rigs and $225 million for operational expansion.

As per an understanding reached between Hut 8 and the Celsius estate, Ionic’s mining operations will be overseen by Hut 8 in exchange for the issuance of equity and a yearly fee of $20 million for four consecutive years. With substantial capitalization, no debt burden, and potentially tens of thousands of investors, Ionic Digital presents an intriguing opportunity for its CEO.

Plans that Lie Ahead

Ionic currently operates about 6 exahash per second (EH/s) of mining power and anticipates reaching 12.7 EH/s later this year once its fleets are fully operational, as per a company spokesperson. The new entity plans to go public in the coming months and has initiated the process by filing Form-10 with the U.S. Securities and Exchange Commission (SEC) on January 26.

Shareholders of the new company will be Celsius creditors, holding equity in the form of common stock. Ionic joins other mining companies looking to go public before this year’s bitcoin halving event, including Swan Bitcoin’s newly formed mining business unit.