Celsius Network, a crypto lending platform, is facing the possibility of needing a new vote from its creditors regarding its plan to pivot to a Bitcoin mining operation. This development follows comments from a U.S. bankruptcy judge during a recent court hearing.
On Thursday, November 30, Celsius outlined its intention to focus solely on Bitcoin mining as it emerges from bankruptcy. This revised business model is a response to regulatory guidance, particularly from the U.S. Securities and Exchange Commission (SEC), which has expressed reservations about Celsius’s original crypto lending and staking operations.
Judge Martin Glenn, overseeing Celsius Network’s Chapter 11 bankruptcy proceedings, expressed concerns about this significant shift in strategy. He emphasized the importance of consensus with the SEC and noted that the new direction in Bitcoin mining substantially differs from the plan creditors initially agreed upon. This could lead to substantial opposition from the creditors.
Celsius’s revised post-bankruptcy strategy aims to mitigate the SEC’s concerns by concentrating on Bitcoin mining. Although the SEC has not formally opposed Celsius’s bankruptcy plan, the agency’s hesitation to support crypto lending and staking has influenced Celsius’s decision.
During the court hearing, Celsius’s attorney, Chris Koenig, argued that the court-approved bankruptcy plan provides the flexibility for the company to transition to an exclusively mining-focused business. Koenig claimed that a new vote from creditors is unnecessary, as the modified plan is equally advantageous for them.
However, two customers, representing themselves without legal counsel, opposed the plan in court documents. They argued that Celsius should opt for complete liquidation instead.
Celsius filed for Chapter 11 protection in July 2022 amid a wave of bankruptcies in the crypto lending sector, exacerbated by the industry’s rapid expansion during the COVID-19 pandemic. The latest plan proposed by Celsius involves releasing $225 million in crypto assets from the control of the Fahrenheit consortium, an external investor group.
Under this new proposal, Celsius’s creditors are expected to recover 67% of their investments, an improvement over the 61.2% recovery rate under the previous arrangement with Fahrenheit. The post-bankruptcy Bitcoin mining operation of Celsius is set to be managed by U.S. Bitcoin Corp, a member of the consortium along with Arrington Capital.
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