Celsius Debtors Restructure Defunct Lenders into Bitcoin Miners Instead of Transferring Assets

According to a November 20 press release, Chelsea Network and its debtors plan to convert defunct lenders into Bitcoin miners as part of the restructuring.

The Chelsea client will own a new entity, provisionally referred to as ‘Mining NewCo’.

Mining NewCo

Celsius proposed establishing Fahrenheit NewCo as part of its restructuring and recovery plan, which the court approved on November 9.

However, after receiving regulatory feedback on the plan from the SEC and consulting with the Official Committee of Unsecured Creditors, the Company and the Debtors decided to change the original plan, which would have entailed a number of regulatory issues.

The pivot is expected to see Chelsea retain some assets initially earmarked for transfer to Fahrenheit NewCo, which will now manage the company’s assets for the benefit of its creditors.

The decision to focus solely on Bitcoin mining represents a shift from previous plans involving cryptocurrency staking. Chelsea’s move toward mining reflects a growing trend in the cryptocurrency industry toward more traditional business practices that are now compliant with regulations.

Chelsea outlined her plans to apply for share registration in a new publicly traded Bitcoin mining company. This move is a strategic step towards creating a more sustainable and transparent business model following bankruptcy.

Mining NewCo is expected to begin operations with lower management costs and increased liquid cryptocurrency distribution, potentially providing greater returns to creditors.

This development marks a critical juncture for Celsius as it emerges from bankruptcy. With its new focus on Bitcoin mining, the company aims to realign its business goals while complying with regulatory requirements.

bankruptcy

Celsius filed for Chapter 11 bankruptcy protection in July 2022 amid a suspension of withdrawals on its platform.

Complicating the company’s problems further, the SEC sued Celesius and former CEO Alex Mashinsky on charges related to the company’s interest accumulation program. Mashinsky was arrested on charges of securities fraud, commodities fraud, and wire fraud, and is currently out on bail. His trial is scheduled to begin in September 2024.

The lender went bankrupt due to complications arising from Mashinsky’s previous trading decisions, mismanagement of $2 billion in assets, and inadequate systems for tracking those assets.

At the time, Mashinsky attributed the collapse to the rapid growth of Celsius’ assets, which he argued outstripped the company’s ability to make prudent investment decisions and resulted in some misjudged asset placements.

The cryptocurrency community and investors will closely monitor Celsius’ progress as it begins this new chapter, hoping for a successful transition and increased stability in the ever-changing cryptocurrency market.