Troubled digital asset lender Celsius Network has informed the court of its intention to start paying back its users by the end of this year, looking for court approval. This repayment announcement came during an October 2 hearing where the company sought approval for its plan to transform into a user-owned Bitcoin mining venture.
Seeking Court Approval
During a confirmation hearing in New York, Christopher S. Koenig, representing Celsius as legal counsel, made opening remarks on the restructured entity, referred to as ‘NewCo.’ He projected that NewCo is expected to emerge from the Chapter 11 bankruptcy by securing $450 million in initial funding.
Koenig revealed that this new entity would also receive substantial financial backing from a consortium called Fahrenheit LLC, led by the investment firm Arrington Capital.
Related reading : US Bitcoin Corp To Acquire Bankrupt Celsius Assets Including 128,200 Miners
He explained that the latter would oversee NewCo’s mining operations:
“Fahrenheit believes in the business. They are putting their money where their mouth is.”
It is important to note that Celsius is planning to partially repay its creditors using $2.03 billion in bitcoin and stock in the new company.
Users would get a stake in legal action against the co-founder and former CEO, Alex Mashinsky, as well as other former executives facing fraud charges. However, Mashinsky has pleaded not guilty to these criminal charges.
Evaluation of Proposed Restructuring Plan
Judge Martin Glenn is currently evaluating the approval of Celsius’s proposed restructuring plan. Despite receiving a majority of votes in favor, the plan faces opposition from many users whose funds have been locked on the platform.
Additionally, an affiliate of Lantern Ventures, claiming around $82 million in owed funds, is contesting the plan. It believes that the firm’s advisors have overvalued the new Bitcoin mining business.
The confirmation hearing filing by Celsius reads, “The Debtors arrive at confirmation with a plan that has the support of over 95% of voting account holders by both number and dollar amount.”
If Celsius’s plan receives approval, it would represent a milestone as the first instance of a failed digital asset platform being reborn in Chapter 11 proceedings. However, if the new company fails, the business can liquidate, resulting in users receiving lower repayments, as indicated in court documents.
Celsius customers have been eagerly awaiting resolution and repayment ever since the company suspended withdrawals in June 2022, a move triggered by the Terra ecosystem collapse. It was among the many digital asset platforms that filed for bankruptcy, including Three Arrows Capital, BlockFi Inc., and FTX.
