A U.S. bankruptcy judge has given the green light to cryptocurrency lender Celsius Network to shift its business focus to bitcoin mining.
This approval allows Celsius to deviate from its previously sanctioned bankruptcy plan, with the judge ruling that creditors and customers would not be adversely affected by this restructuring change.
U.S. Bankruptcy Judge Martin Glenn in Manhattan noted that the bankruptcy plan approved in November was sufficiently flexible to permit Celsius to adopt an alternative strategy. This decision comes after the U.S. Securities and Exchange Commission (SEC) blocked Celsius’s initial plan, which involved earning fees from validating crypto transactions and launching new business lines.
Bankrupt crypto lender Celsius, which filed for Chapter 11 bankruptcy protection in July 2022 amidst a wave of bankruptcies in the crypto lending sector, will now focus on bitcoin mining operations. This pivot also means that Celsius will part ways with some external bidders, initially set to manage the new company. Instead, US Bitcoin Corp, led by Asher Genoot of Hut 8, will take the helm of the new creditor-owned mining business.
The transition to bitcoin mining is a major shift from Celsius’s original consortium of bidders, which included Arrington Capital and was collectively known as “Fahrenheit.”
Some creditors and the U.S. Department of Justice’s bankruptcy watchdog argued that such a substantial change warranted a new vote by creditors. Judge Glenn initially agreed with such views, acknowledging that the new mining plan differed materially from the original deal. However, he ultimately approved the transition without requiring another creditor vote.
Celsius’s interim CEO, Chris Ferraro, welcomed the court’s decision, adding that “This is a significant day for Celsius creditors and our focus on promptly distributing cryptocurrency continues to guide us.”
The news comes as Celsius is taking steps to allow certain customers to withdraw their funds. However, some users reported difficulties in logging in to process their withdrawals.
According to a recent court document, customers who are part of the Custody Program and classified as holding “Class 6A General Custody Claims” and/or “Class 6B Withdrawable Custody Claims” will be eligible to initiate withdrawals from the platform starting today.
Additionally, customers who voted against the reorganization plan will not be included in this distribution. Instead, their funds will be placed in a segregated wallet and managed by the Litigation Administrator for the next six months.