Celsius Network, after 18 months of bankruptcy proceedings, has officially concluded its Chapter 11 case. The now-defunct crypto lending platform announced that it would distribute $3 billion in cryptocurrency and fiat to its creditors.
The firm stated that PayPal and Coinbase will handle the distribution of cryptocurrencies to its creditors. The development comes following a challenging period marked by paused user withdrawals and significant financial turmoil.
In addition to the cash distribution, creditors are set to receive stakes in Ionic Digital Inc., a new bitcoin mining operation. Approximately 98% of Celsius Network’s creditors approved the reorganization plan, which includes the establishment of Ionic Digital. This new entity, owned by the creditors, is expected to become a publicly traded company pending necessary regulatory approvals.
Miami-based crypto miner Hut 8 will manage Ionic’s operations under a four-year agreement and its chief commercial officer Matt Prusak has been named the CEO.
“When we were appointed in June 2022, everyone assumed Celsius would disappear completely like the other crypto lenders that were filing bankruptcy around the same time,” the special board committee that managed the bankruptcy said.
As part of the transition, Celsius is phasing out its business operations, including the shutdown of its mobile and web applications. The company declared bankruptcy on July 13, 2022, after revealing a $1.2 billion gap in its balance sheet.
Throughout the bankruptcy process, Celsius faced several legal challenges. Last year, it was sued by various regulators, including the Securities and Exchange Commission (SEC), the Federal Trade Commission (FTC), and the Commodity Futures Trading Commission (CFTC), for allegedly misleading customers. Its founder and former CEO Alex Mashinsky was also charged with fraud. He was released on a $40 million bond, with his assets frozen, and his trial is set for September 2024.
In addition to resolving the bankruptcy, Celsius managed to secure a settlement with U.S. authorities over fraud allegations, amounting to $4.7 billion. Interestingly, the Celsius bankruptcy administrators told creditors that account holders who withdrew over $100,000 in the 90 days before the firm’s bankruptcy declaration on July 13, 2022, might need to return those funds by January 31, 2024.