Crypto lending firm Celsius shifts focus to Bitcoin mining

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Crypto lending platform Celsius has restructured its company to concentrate solely on Bitcoin mining. The lending company has been in bankruptcy court since it filed for Chapter 11 in 2022. In July, the United States Securities and Exchange Commission (SEC) took legal action against the firm and its former CEO, Alex Mashinsky.

On November 9, the Bankruptcy Court in the Southern District of New York confirmed Celsius Network LLC’s Chapter 11 plan.

After the confirmation, Celsius received feedback from the SEC about the plan. Celsius then announced on November 20 that it planned to seek registration for shares in a new publicly traded Bitcoin mining company called the “Mining NewCo.” This shift differs from the initially proposed “Fahrenheit NewCo” described in the plan.

Due to regulatory reasons highlighted by the SEC’s feedback, certain assets initially intended for transfer to Fahrenheit NewCo must remain with Celsius’ estates. These assets will be managed and monetized by the Plan Administrator and or Litigation Administrator for the benefit of creditors, as decided by Celsius’ debtors in consultation with the Official Committee of Unsecured Creditors.

“In the coming weeks, the Debtors intend to file a motion with the Bankruptcy Court to approve modifications to the Plan to reflect the new Mining NewCo transaction,” said Celsius. “The Debtors do not believe that these modifications will require resolicitation of the Plan. The Debtors still anticipate that distributions to creditors will commence in January of 2024.”

Celsius filed for Chapter 11 bankruptcy due to a temporary halt in withdrawals on its platform. In July 2023, the SEC sued Celsius and Mashinsky, accusing the former CEO of making false claims of a secure investment in the firm’s Earn interest program.

In July, the U.S. Justice Department arrested Mashinsky, charging him with securities fraud, commodities fraud and wire fraud over claims of deceiving customers. Currently, Mashinsky is out on $40 million bail, and his trial will start in September 2024.

Celsius is currently in talks with certain parties to determine the future management of Mining NewCo. Despite ongoing negotiations, due to Mining NewCo’s smaller size and scale compared to the previously planned Fahrenheit NewCo, Celsius’ debtors anticipate that the total fees and incentives for the Mining NewCo operators will be less. They also expect a larger amount of liquid cryptocurrency will be available for direct distribution to customers compared to what would have been possible with the Fahrenheit NewCo.

U.S. Trustee rejects $5M claims in Celsius bankruptcy

The U.S. Trustee in the Celsius bankruptcy case has objected to claims from multiple parties that they made significant contributions to the bankruptcy proceedings of Celsius Network and its affiliates.

These parties, consisting of five ad hoc groups and six individuals, collectively argue that their efforts significantly contributed to the bankruptcy proceedings, supporting their claim for about $5 million in expenses, including professional fees.

The claims included expenses for travel like Amtrak rides, Ubers, meals and hotels, one totaling $2,108.49, which the Trustee argued lacked clear justification for reimbursement based on substantial contribution. The Trustee highlighted that a particular claimant’s contribution to the Earn Ad Hoc Application did not show the necessity or nature of their contributions to the mediation or the bankruptcy case.

Another claimant requested up to $1,000 for future expenses, totaling $2,000 in estate resources, marked as “unknown” and unsubstantiated without additional court review or order. The objection pointed out that Section 503(b) doesn’t allow for future relief, and charges for items like pharmacy items and Uber rides to court were seen as non-compensable.

Additional applications sought around $437,065.38 in expenses from prepetition dates to filing the applications. They also aimed for separate reimbursement through the Earn Ad Hoc Application. The objection revealed they were not entitled to Section 503(b) expenses.