Cryptocurrency platform Celsius emerges from Chapter 11

April 2024 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

April 2024 Issue

Global cryptocurrency platform Celsius Network LLC has successfully emerged from Chapter 11 bankruptcy by completing the transactions under its confirmed plan of reorganisation, which has been overwhelmingly approved by approximately 98 percent of the company’s account holders.

The company’s emergence marks the conclusion of an 18-month process during which it has reportedly built consensus among a wide range of stakeholders, resolved complex novel legal issues, fully cooperated with all regulatory investigations, and developed and consummated the transactions under a reorganisation plan.

New Jersey-based Celsius filed for Chapter 11 bankruptcy protection in July 2022, one month after freezing customer accounts to prevent withdrawals.

Celsius’ plan of reorganisation includes the distribution of over $3bn of cryptocurrency and fiat to its creditors, and the creation of a new Bitcoin mining company – Ionic Digital, Inc. – which will be owned by Celsius’ creditors and will have its mining operations managed by Bitcoin mining firm Hut 8 Corp.

To facilitate secure, timely and fully compliant distributions, Celsius and its advisers have coordinated with the Uniform Commercial Code and certain federal and state regulatory agencies throughout its restructuring.

“Creating the best outcome for creditors by maximising value and speed have been front of mind for Celsius throughout this process,” said Chris Ferraro, plan administrator and former chief restructuring officer, interim chief executive and chief financial officer at Celsius. “Over 18 months after Celsius paused withdrawals, we began distributing over $3bn of cryptocurrency, fiat and stock in Ionic Digital to Celsius creditors.”

In addition, Celsius has increased the amount of cryptocurrency available for distribution to creditors by nearly $250m by converting altcoins to bitcoins or ethereum and through previous settlements.

“Our exit from bankruptcy is the culmination of an extraordinary team effort and extensive collaboration between Celsius, Hut 8, strategic partners and our creditors,” added David Barse and Alan Carr, members of the special committee of the board of Celsius. “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,” they continued. “Possibly our most important achievement is that we settled with the Department of Justice, the Securities and Exchange Commission and the Commodity Futures Trading Commission.”

With the transition, Celsius will now pursue an orderly wind down of its operations, including discontinuing the Celsius mobile and web applications.

Serving as legal counsel to Celsius is Kirkland & Ellis LLP, with Centerview Partners serving as financial adviser. Alvarez & Marsal is serving as restructuring adviser, and C Street Advisory Group is serving as strategy and communications adviser to the debtors.

White & Case LLP is serving as legal counsel, Perella Weinberg Partners is serving as investment banker and M3 Partners is serving as financial adviser to the committee. Cleary Gottlieb Steen & Hamilton LLP is serving as legal counsel to Ionic Digital and Brown Rudnick LLP is serving as legal counsel to Hut 8.

Mr Barse and Mr Carr concluded: “We are proud of the preservation and distribution of Celsius’ cryptocurrency assets and enhanced recovery for customers and claim holders.”

Fraser Tennant