The New York bankruptcy court has approved Celsius Network’s restructuring plan, effectively enabling the cryptocurrency lending platform to come out of bankruptcy.
Meanwhile, the US Securities and Exchange Commission (SEC) still has to greenlight the company’s new bitcoin mining firm.
More than one year after filing for Chapter 11 bankruptcy and freezing customer funds, Celsius will now be able to move ahead with its restructuring and repayment plan following an order from Judge Martin Glenn of the US Bankruptcy Court Southern District of New York.
According to an excerpt from the court ruling, Judge Glenn said, “The Plan is confirmed pursuant to section 1129 of the Bankruptcy Code.” The court approval marks a significant development for the company, which experienced a liquidity crisis and collapsed in 2022.
Celsius’ restructuring plan proposes transitioning into a new bitcoin mining entity owned by creditors called NewCo and involves the redistribution of $2 billion worth of BTC and ETH to customers, along with shares in the newly established company.
A consortium comprising a group of companies, including Coinbase, called Fahrenheit LLC, will manage NewCo. As previously reported by CryptoPotato, the majority of Celsius creditors voted in support of the plan.
Despite the latest development, NewCo will need to be approved by the SEC, according to a Bloomberg report. Judge Glenn previously called on the American securities regulator to decide whether or not the agency will give the go-ahead to Celsius’ plan. Meanwhile, if the bitcoin mining plan fails, the crypto lender may move to liquidation, per the report.
With Celsius cleared to exit bankruptcy, the company’s former CEO, Alex Mashinsky, is scheduled to stand trial in September 2024. Mashinsky, who is accused of defrauding Celsius customers and manipulating the value of the platform’s native coin, CEL, was arrested in July 2023 and later released on a $40 million bond.
However, the ex-Celsius boss has denied the allegations leveled against him by the US Federal Trade Commission (FTC) and the SEC and pleaded not guilty.
Unlike Mashinsky, another former Celsius executive, Roni Cohen-Pavon, pled guilty to criminal charges against him and is working with investigators.
Meanwhile, the crypto lender reached a settlement with the FTC to pay a $4.7 billion fine, with the firm and its entities banned from handling customer funds.