Celsius Network has announced emerging from bankruptcy, concluding an eighteen-month process with the confirmation of its plan of reorganization.
The agreement includes the distribution of a $3 billion payout to its creditors as well as the creation of Ionic Digital, which will be owned by Celsius’ creditors, who will own equity in the form of common stock.
Celsius Network Exits Bankruptcy
According to the official press release, Celsius’ reorganization plan, approved by 98% of account holders and confirmed by the Bankruptcy Court for the Southern District of New York, involves the distribution of over $3 billion in crypto and fiat to creditors.
A new entity, Ionic Digital, has been established from the reorganization and is owned by creditors, with plans for its stock to become publicly traded upon obtaining necessary approvals. The operation of this new Bitcoin mining company will be managed by Hut 8 under a four-year management agreement.
Matt Prusak, previously serving as Chief Commercial Officer at Hut 8, has been appointed as the CEO of Ionic Digital. He will collaborate with the Board of Directors, the majority of whom were designated by the UCC.
Celsius has decided to transition to the “MiningCo Transaction” following feedback from the US Securities and Exchange Commission (SEC) and in consultation with the Official Committee of Unsecured Creditors to increase transparency and compliance.
By increasing the crypto available for distribution to creditors and resolving previous settlements, Celsius aims to ramp up efforts to maximize recoveries.
In a joint statement, David Barse and Alan Carr, members of the Special Committee of the Board of Celsius, who have been steering Celsius through its Chapter 11 process, said,
“Our exit from bankruptcy is the culmination of an extraordinary team effort and extensive collaboration between Celsius, Hut 8, strategic partners, and our creditors. 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. We, however, believed that Celsius could navigate complicated legal, regulatory, and business issues.”
Meanwhile, Celsius will cease operations, leading to the discontinuation of its mobile and web applications.
Celsius Network made headlines by being the first major crypto player to raise the argument of “unsecured creditors” in court to access client funds.
Subsequently, Celsius issued a warning, through its legal representatives at Kirkland & Ellis, to users who withdrew more than $100,000 from the platform in the 90 days leading up to the lender’s bankruptcy declaration. These users were urged to address their outstanding liabilities promptly or potentially face litigation.
Kirkland & Ellis lawyers termed the act of withdrawing funds before bankruptcy as “avoidance actions,” subject to legal pursuit. As per the document, these creditors were instructed to return 27.5% of their withdrawals by January 31st or risk clawback measures. This proposal was met with significant criticism.