More than a year after filing its application, Celsius Network received approval from the New York bankruptcy court for its restructuring plan. Creditors supported the restructuring and view with optimism the backing from companies like Coinbase, among others.
This step will allow the cryptocurrency lending platform to move forward with its restructuring plan and emerge from bankruptcy.
The court’s approval marks a key development for the company, which faced a liquidity crisis and collapsed in 2022.
According to Judge Martin Glenn’s ruling from the US Bankruptcy Court Southern District of New York, “The plan is confirmed pursuant to section 1129 of the Bankruptcy Code.”
This process involves Celsius transitioning into a new Bitcoin mining entity called NewCo, owned by the creditors.
Moreover, the redistribution of $2 billion in BTC and ETH to customers, along with shares in the newly established company, is anticipated.
A consortium, Fahrenheit LLC, including companies like Coinbase, will manage NewCo. Despite this progress, SEC approval is necessary for NewCo, according to Bloomberg reports.
Judge Glenn previously called on the United States Securities and Exchange Commission to decide whether or not to approve Celsius’ plan.
If the Bitcoin mining project doesn’t get the green light, the cryptocurrency platform could head towards liquidation.
Legal Proceedings Against Celsius Leadership
Simultaneously, the former CEO of Celsius, Alex Mashinsky, is scheduled to face trial in September 2024.
Mashinsky, accused of defrauding Celsius customers and manipulating the value of the platform’s native currency, CEL, was arrested in July 2023 and released on a $40 million bond.
Despite allegations from the Federal Trade Commission (FTC) and the SEC, Mashinsky pleaded not guilty.
In contrast, another former Celsius executive, Roni Cohen-Pavon, pleaded guilty to criminal charges and is cooperating with investigators.
Furthermore, Celsius agreed to pay a $4.7 billion fine in a settlement with the FTC, and the company and its entities are prohibited from handling customer funds.
The approval of the restructuring plan and the exit from bankruptcy mark the right path for Celsius Network.
It must continue on this path while facing regulatory and legal challenges on its journey to recovery. It needs to address the shortcomings against its former users and clients until full resolution is achieved.