Celsius Network made it!
The company filed for Chapter 11 back in 2022, announced that it had successfully completed the process and is now in condition to pay its creditors. According to the announcement, the company says the distribution of more than $3 billion in cryptocurrency, fiat to creditors, and common stock has already begun.
The distribution of the payments will be made via PayPal and Coinbase, with the assigned distribution partner depending on the location of the creditors. So far, it is not clear how customers from certain countries will receive their distribution if they are unable to meet Coinbase’s KYC requirements.
Celsius’ New Mining Operation
The successful completion of Celcius’ Chapter 11 process came with the fulfillment of the transactions it had established under its bankruptcy plan. This plan, which a court had approved back in November 2023, not only included the distribution of over $3 billion to creditors but also the creation of a new Bitcoin mining operation: Ionic Digital Inc.
The new company will be owned by Celsius creditors who will receive equity in the form of common stock. It will be publicly traded “once the requisite approvals are received”. According to the company, the shares will be issued “shortly after the effective date of the Plan, which is January 31, 2024.” Odyssey Transfer and Trust Company will be in charge of helping customers receive their Ionic Digital shares.
Hut 8 Corp was selected to manage the new mining company, with its Chief Commercial Officer, (CCO) Matt Prusak, taking the role of CEO of Ionic Digital. Prusak, who was with Hut 8 Corp for three months only, had previously served as USBTC’s CCO
So, What Are Creditors Getting?
Celsius’ plan was described by the Plan Administrator and former Chief Restructuring Officer Chris Ferraro as “the best outcome for creditors” and was approved by almost 98% of the company’s account holders. This plan originally allocated $2 billion to be distributed to the creditors, established the return of between 67% and 85% of all holdings, and proposed the launch of Ionic Digital.
The assets to be received by every creditor will depend on their class, meaning that it is possible for two creditors to receive different distributions. According to the notice of effective date, only Class 2 (Retail Borrower Deposit Claims), Class 5 (General Earn Claims), Class 7 (Withhold Claims), Class 8 (Unsecured Loan Claims), and Class 9 (General Unsecured Claims) will receive Ionic Digital stock.
Creditors in Class 2, Class 4 (Convenience Claims), Class 5, Class 7, Class 8, and Class 9 will receive “liquid cryptocurrency” as part of the distribution. These creditors will have to wait up to two weeks to receive instructions on how to claim their distribution, a waiting time the company attributes to “the volume of distributions”.
As this distribution of liquid cryptocurrency won’t use Celcius’ mobile or web apps, Paypal/Venmo and Coinbase will be used as distribution partners. Among the many nuances creditors will have to deal with are the completion of AML/KYC processes with their distribution partners and the submission of additional information such as “Election Forms”.
A Win For the Underdogs
Celcius Network is only one of the multiple cryptocurrency-related companies to file for Chapter 11 over the past two years. Names like FTX, BlockFi, Genesis, Voyager Digital, and Terraform Labs are all part of the list, a fact that has become a common argument against cryptocurrency by detractors.
While Celcius is not alone in filing for Chapter 11, its successful emergence from it has been received with surprise by many. Not only did many people expect the company not to make it but even fewer expected all creditors to be paid in the process. This was highlighted in the announcement by David Barse and Alan Carr, members of the Special Committee of the Board of Celsius, who said “everyone assumed Celsius would disappear completely like the other crypto lenders”.
The successful reorganization of Celsius Network offers a glimmer of hope to creditors of other cryptocurrency companies going through Chapter 11. While the path through bankruptcy can be long and uncertain, Celsius demonstrated that it is possible for these companies to restructure their debts and emerge in a position to make up for their creditors.