Failed crypto lender Celsius Network has received bankruptcy court approval for its plan to transform into a creditor-owned Bitcoin mining firm, as reported by Bloomberg.
The approval is part of a wider proposal aimed at repaying customers who have frozen their accounts for over a year.
Celsius Network’s Path To Recovery
US Bankruptcy Judge Martin Glenn confirmed Celsius’ plan on Thursday, which involves repaying customers through a combination of crypto assets and stock in the newly established Bitcoin mining company, which will be publicly listed. Celsius’ legal team has indicated that the distribution of assets could commence in early 2024.
This decision is a significant milestone for Celsius, which faced bankruptcy last year amid a general decline in the crypto market and prices.
Despite fraud allegations against former executives, the company garnered enough support from creditors to emerge from Chapter 11.
Former Celsius CEO, Alex Mashinsky, has been accused by federal prosecutors of manipulating the company’s native CEL token and providing misleading information to entice customers to invest.
Regulatory Approval Key To Transition Into Crypto Miner
Celsius’ plan to transition into a crypto miner has faced skepticism from some customers and still awaits regulatory approval.
The company acknowledges the need for endorsement from the US Securities and Exchange Commission (SEC) and acknowledges the possibility of liquidation if the crypto-mining proposal fails to materialize.
Nevertheless, Judge Glenn urged the SEC to expedite its decision to approve Celsius’ plan to emerge from Chapter 11 as a publicly listed Bitcoin mining firm.
The court’s approval of Celsius’ plan followed a multiweek trial during which individual customers questioned the firm’s new management team and expressed concerns about the bankruptcy plan’s costs.
Customers argued that the plan undervalues Celsius’ CEL token, intended to distribute digital assets and stock in the new Bitcoin mining company to creditors.
Celsius’ bankruptcy lawyers argued that the CEL token was essentially worthless at the time of the Chapter 11 filing in 2022, as it served as a substitute for company stock, which is typically eliminated in bankruptcy cases.
Judge Glenn’s acceptance of Celsius’ bankruptcy plan avoided the need for a ruling on whether the CEL token constitutes a security, a complex legal issue with broader implications for regulating the cryptocurrency industry in the United States.
As the former crypto lender progresses with its transformation into a creditor-owned Bitcoin mining firm, the regulatory hurdles it faces and customer concerns underscore the evolving landscape of the crypto industry and the need for clarity in regulatory frameworks to protect stakeholders.
Currently, the native token of the network, CEL, is trading at $0.2314, reflecting a decrease of over 6% compared to the prevailing market trend.
Featured image from Shutterstock, chart from TradingView.com