- A U.S. bankruptcy judge has indicated that Celsius Network may need to secure a new creditor vote on the proposal to convert the company into a Bitcoin mining operation.
- Celsius attorney Chris Koenig argued in a Thursday hearing that the court-approved bankruptcy plan provides flexibility for the company to make changes related to mining.
- Celsius applied for Chapter 11 protection in July 2022 and became one of several crypto lending providers to file for bankruptcy following the industry’s rapid growth during the COVID-19 pandemic.
Celsius, now bankrupt, wants to shift its business entirely by starting Bitcoin mining, but faces some obstacles!
Challenges in Celsius’s Mining Venture
A U.S. bankruptcy judge stated during a hearing on Thursday that crypto lending provider Celsius Network might need to obtain a new creditor vote on the proposal to convert the company into a Bitcoin mining operation.
Last week, Celsius announced that it had scaled back its post-bankruptcy business plans to focus solely on Bitcoin mining, citing skepticism from the U.S. Securities and Exchange Commission (SEC) about its other planned business lines.
U.S. Bankruptcy Judge Martin Glenn, overseeing Celsius’s Chapter 11 process in New York, expressed that there might be a need for a new hearing regarding a statement about the belated change, emphasizing the necessity for Celsius to secure an agreement with the SEC.
Glenn stated, “This is not an agreement voted on by the creditors.” The judge noted that the revised agreement might face “serious opposition” from creditors. While the SEC did not outright object to Celsius’s bankruptcy plan, the company stated that the agency was unwilling to endorse crypto lending and staking activities it had opposed in the past.
Celsius attorney Chris Koenig argued during Thursday’s hearing that the court-approved bankruptcy plan allows the company flexibility to make changes related to mining without needing a new vote. He claimed there is no need for a new vote since the new agreement is equally beneficial for creditors.
Celsius’s Bankruptcy Process and Beyond
Celsius applied for Chapter 11 protection in July 2022 and became one of several crypto lending providers to file for bankruptcy following the industry’s rapid growth during the COVID-19 pandemic. According to Koenig, Celsius’s revised plan releases $225 million in crypto assets, to be managed by an external investor consortium called Fahrenheit, from the former bankruptcy plan.
Under the new proposal, Celsius’s post-bankruptcy mining business will be managed by U.S. Bitcoin Corp, which previously submitted a bid as part of a broader consortium, including Arrington Capital. Arrington and other Fahrenheit bidders will not be part of the new company, and Celsius chose U.S. Bitcoin over Blockchain Recovery Investment Consortium (BRIC), an alternative bidder selected in an auction that concluded in May.
An attorney for BRIC argued on Thursday that Celsius should make a new deal with U.S. Bitcoin instead of adhering to the backup bid agreement. Celsius attorney Koenig dismissed the BRIC agreement as “stale” and argued that U.S. Bitcoin’s offer, with which Celsius recently conducted further negotiations, is a better option. Two clients filed documents on Wednesday opposing the agreement, arguing for Celsius’s complete liquidation.
