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Celsius Exit from Bankruptcy After 18-Month Battle

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A new beginning awaits stablecoin issuer Celsius Network LLC as it officially exits bankruptcy, marking the culmination of an intense restructuring process. The crypto firm, which concluded its financial reorganization on January 31, 2024, disclosed this information in a press release. The achievement follows the implementation of the confirmed plan of reorganization [“Plan”], a strategy that garnered approval from an overwhelming 98% of the firm’s account holders. The Bankruptcy Court for the Southern District of New York, known as the “Bankruptcy Court,” officially confirmed the plan on November 9, 2023.

Our exit from bankruptcy is the culmination of an extraordinary team effort and extensive collaboration between Celsius, Hut 8, strategic partners, and our creditors.

Celsius Network portrayed this milestone as the culmination of a grueling eighteen-month journey. The crypto firm emphasized its success in building consensus among diverse stakeholders, resolving intricate legal matters, cooperating fully with regulatory investigations, and executing the transactions outlined in the plan.

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Celsius Exit from Bankruptcy After 18-Month Battle 2

The reorganization plan encompasses the distribution of over $3 billion in cryptocurrency and fiat to Celsius’ creditors. Additionally, a new Bitcoin mining entity, Ionic Digital, Inc., has been established as part of the restructuring. This new venture will be owned by Celsius’ creditors and will have its mining operations managed by Hut 8 Corp.

Celsius: Overcoming Regulator Roadblocks

The crypto lender faced considerable challenges post-bankruptcy as it fought to salvage its bitcoin mining and crypto lending operations. A crucial turning point came in December 2023, when a U.S. court approved the crypto firm to establish the aforementioned Bitcoin mining company, a move sanctioned by U.S. bankruptcy judge Martin Glenn. This decision allowed the debtors to initiate liquid cryptocurrency distributions on the effective date.

At that time, the Official Committee of Unsecured Creditors representing Celsius Networks expressed confidence in the bankruptcy process’s trajectory, affirming, “We believe the debtors remain on track for the effective date to occur at the end of January.”

Celsius overcame obstacles from creditors and regulators before the December ruling paved the way for the crypto lending platform’s emergence from bankruptcy in early 2024. As per the latest P.R., the firm will now pursue an orderly wind-down [OWD] of its operations, including discontinuing the Celsius mobile and web applications.

Celsius To Launch MiningCo: Orderly Wind Down Approved

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A U.S. bankruptcy judge, Martin Glenn, has approved Celsius Network to establish a new Bitcoin mining company owned by creditors. The decision stems from the Orderly Wind Down / MiningCo transaction, as sanctioned by the Court and detailed in an opinion and order issued by Judge Glenn. The ruling permits the debtors to initiate liquid cryptocurrency distributions on the effective date.

The complete opinion can be accessed here: Link to Opinion.

The Official Committee of Unsecured Creditors representing Celsius Networks expressed confidence in the trajectory of the bankruptcy process, stating, “We believe the debtors remain on track for the effective date to occur at the end of January.” Simon Dixon, founder of Bank of the Future, shared his optimism, saying,

Happy Holidays, Celsius Creditors. After a year and a half, the OWD plan has been approved with no revote. In January 2024, we should have an effective date before Bitcoin passes $54k, locking in the upside of all assets for creditors. Judge Glenn ruled.

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Celsius To Launch MiningCo: Orderly Wind Down Approved 4

As Celsius transitions into ‘MiningCo,’ an imminent rebranding announcement is anticipated.

The Manhattan-based court’s decision allows Celsius to deviate from a previously approved bankruptcy plan, justified by the assurance that creditors and customers would not be at a disadvantage under the new restructuring. Judge Glenn emphasized that the flexibility inherent in the plan approved in November enabled Celsius to pivot to an alternate strategy after encountering challenges with the U.S. Securities and Exchange Commission.

The collapse of one of the leading crypto firms was attributed to problematic decisions and the then-prevailing market conditions. To recall, Celsius’ precarious condition was exacerbated by LUNA’s fiasco coupled with an overleveraging issue and the poorly executed WBTC and ETH/stETH positions that led to a total lockdown of their platform.

The crypto firm made headlines again after kicking off an auction on April 22, as it looked for a buyer to save its bitcoin mining and crypto lending operations from bankruptcy.

Celsius Eyes Early 2024 Exit From Bankruptcy

The subsequent reorientation after SEC’s rejection also led Celsius to sever ties with external bidders initially selected to manage the new company. Consequently, mining company US Bitcoin Corp., founded by Hut 8’s Asher Genoot, assumed a central role in overseeing the newly established creditor-owned mining business.

Despite objections from some creditors and the U.S. Department of Justice’s bankruptcy watchdog, who argued for a new vote, Judge Glenn ultimately approved the change without requiring additional creditor approval. The crypto lending platform expects to emerge from bankruptcy in early 2024.

Voyager Digital Restores Fund Withdrawals: Over $250M Pulled Out

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Crypto lending platform Voyager Digital restarted fund withdrawals after almost a year of suspension as investors and creditors rushed to take in more than $250 million in three weeks. Since filing for Chapter 11 bankruptcy, the firm said on June 23 that withdrawals would resume, allaying users’ fears.

Due to the turbulence in the cryptocurrency markets, Voyager was one of many crypto lenders to file for bankruptcy protection in 2022. Others were Genesis Global Capital, Celsius Network, and BlockFi. A significant loan made to the cryptocurrency hedge firm Three Arrows Capital [3AC] went bad, which made the situation worse.

Voyager Digital’s financial woes began after the implosion of the Terra ecosystem, which inflicted substantial damage on investors, eroding over $40 billion of their funds. To top that, widespread withdrawals in the crypto-lending space sparked a bank run, leading to an acute liquidity crisis.

Under the direction of CEO Steve Ehrlich, the publicly traded entity with headquarters in Canada disclosed liabilities ranging from $1 billion to $10 billion during its bankruptcy case.

The recovery of funds for Voyager users is also heavily reliant on the outcome of the legal dispute with FTX, in which the former is attempting to retrieve almost $446 million in loan repayments paid to it prior to FTX’s bankruptcy. Customers’ anticipated reimbursement would increase to 63.74% if the lending firm completely wins the FTX litigation, per court documents.

At a court hearing in Manhattan, U.S. Bankruptcy Judge Michael Wiles green-lighted Voyager’s liquidation plan, enabling the business to restore around $1.33 billion in cryptocurrency assets to consumers and put a stop to its Chapter 11 reorganization efforts.

Voyager’s Legal Fees Pile Up

The Chicago-based law firm Kirkland & Ellis recently charged Voyager and associated debtors a total of $27.97 million for legal services rendered between July 5, 2022, and May 19, this year. According to the document, the debtors have already given Kirkland & Ellis compensation of $23.38 million.

Voyager is not the only business dealing with significant costs throughout its bankruptcy procedures. As was previously reported, from February 1 to April 30, FTX spent more than $120 million on financial and legal consulting costs.

Celsius: Federal Lawsuit Looms Over Crypto Lender After CFTC Findings

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Insolvent crypto loan platform Celsius could be in for more trouble. Investigators from the Commodity Futures Trading Commission [CFTC] have accused the firm of scamming investors out of billions of dollars.

In a recent Bloomberg article citing familiar sources, lawyers in the enforcement section came to the conclusion that Celsius had deceived investors, should have registered with the regulator, and that former CEO Alex Mashinsky had also broken the law.

If the majority of CFTC commissioners concur with the investigators’ conclusions, the organization might even bring legal action against the now-defunct crypto lender this month.

The US agency that oversees the derivatives market would take a final call this month on whether to bring the lawsuit.

The latest probe from the CFTC investigators is yet another regulatory action that has been taken against the now-defunct crypto lending site. Federal prosecutors in Manhattan and the SEC are also conducting their respective investigations.

New York attorney Letitia James, who filed suit against CEO, and founder Alex Mashinsky a few months back tweeted yesterday that he lied to people about the risks of investing in Celsius, hid its deteriorating financial condition, and failed to register in New York.

On January 5, the New York Attorney General filed a lawsuit against Mashinsky, claiming the former CEO had deceived investors and caused losses of billions of dollars.

Celsius Served Fraud Suit By New York State

The suit alleged Mashinsky “told investors that Celsius would generate sustainably high returns by making low-risk collateralized loans to first-tier institutions and cryptocurrency exchanges as well as overcollateralized loans to retail borrowers.”

The lawsuit claimed that as the company expanded, ”it struggled to generate enough revenue to pay the promised yields on investors’ deposits. In search of revenue, Celsius moved into significantly riskier investments, extending hundreds of millions of dollars in uncollateralized loans, and investing hundreds of millions of dollars in unregulated decentralized finance platforms.” 

Following a recent court order to sell them for Bitcoin [BTC] and Ethereum [ETH], the New Jersey-based firm traded over $70 million worth of altcoins on July 5.

Per Arkham Intelligence, Celsius holds crypto assets worth $614.28 million in its wallets.

SEC Agree To Waive BlockFi’s $30M Fine On One Condition

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Troubled crypto lender BlockFi got a major relief after the SEC agreed to spare the $30 million penalty it owed to the commission.

The amount is the remainder of the $50 million fine that must be paid to the SEC for failing to register with the regulator for the offering and sale of its crypto lending product.

According to the court filing, the decision to relinquish the payment was taken “to maximize the amount that may be distributed to investors and avoid delay in such distribution.”

In the agreement reached on June 22, SEC also argued that its claims ought to be included in the category of “general unsecured claims” in the ongoing Chapter 11 bankruptcy proceedings.

As part of its settlement with the SEC and other state regulators in February 2022, BlockFi owed a total of $100 million.

Previously TronWeekly reported on BlockFi’s settlement terms which included paying a $50 million fine to the SEC and another $50 million to various states.

The penalties of this magnitude were considered some of the harshest ever imposed on a crypto firm that also came in the backdrop of a U.S. clampdown on the industry.

The SEC and various state investigators ramped up their scrutiny on several companies, including Celsius Network and Gemini Trust Co. that gained immense popularity with retail investors for paying yields sometimes exceeding 10%.

Crypto-lenders, in particular, were under the prying eyes of the regulators then as they attracted several billions of dollars in deposits by promising yields much higher than those available through traditional savings accounts.

The lending platform’s other accusations included illegally offering a product that promises customers high-interest rates to lend out their digital assets.

BlockFi Vs FTX

Following FTX’s implosion, the crypto lender filed for bankruptcy in November. An urgent loan offered to the fallen exchange on July 1 might have expedited BlockFi’s sharp decrease in value.

With that financing, FTX was given the option to purchase BlockFi for $240 million, thereby establishing a cap on the value of the company’s shares.

In days that followed, the relationship between the two firms soured after a disagreement arose over $465 million worth of shares of online broker Robinhood Markets Inc. that BlockFi had pledged as security for an outstanding obligation owing to it by FTX affiliate Alameda Research.

Just In- Vauld To Pay Creditors In Next 4-6 Weeks

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Embattled crypto lender Vauld has a major update for its creditors. In a Telegram message dated 20 June, the firm apprised its users of a vote that took place from May 31 to June 8, 2023, giving creditors the chance to choose whether or not to support the proposed scheme of funds payout [the “Scheme”].

The poll also had the option of their preferred choice of Creditor Representative should the Scheme be passed and made effective.

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Just In- Vauld To Pay Creditors In Next 4-6 Weeks 6

According to the results, a total of 6,721 legitimate votes—representing USD253,139,730.25 in approved claims—have been cast. Mr. Luke Furler, the court-appointed Independent Assessor from Quantuma [Singapore] Pte Limited, has confirmed the vote’s outcomes.

Out of the valid votes received from creditors, 91.85% by count and 90.23% by value voted in favor of the scheme. As a result, Vauld informed that it will move forward with an application to the Singapore Court to sanction the scheme due to meeting the necessary threshold of 75%.

Based on the results that have been verified above by the Independent Assessor, we have been advised by our solicitors that the statutory threshold of a majority in number and 75% in value of the creditors for each class of creditors and across the board have been met. As such, we are pleased to announce that we will be proceeding with an application to the Singapore Court to sanction the Scheme

When a user asked when INR holders would receive their money back, Vauld replied that INR would be refunded in the next 4-6 weeks from the moment the scheme was put into place.

Members also enquired about the timeframe of the preferred payout option which the platform stated, “You will be able to opt-in for your favorite track during the second or third week of July.”

Last July, the beleaguered firm filed for creditor protection in Singapore after it suspended withdrawals, trading, and deposits on its platform.

Vauld’s Assets Froze By India’s ED

It received a second court extension to present its restructuring plan, giving it protection from its creditors until March 24.

Authorities in India froze the platform’s assets worth Rs 370 crore [$46 million] last August.

The crackdown was part of a nationwide investigation by the top enforcement agency on a number of homegrown crypto firms for potential “predatory lending practices” in violation of the RBI [India’s central bank] guidelines.

Crypto Lender Celsius Embarks On A Recovery Path

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Celsius Network LLC has submitted an updated bankruptcy plan after Fahrenheit’s successful acquisition. According to the filing, which was made public in the early hours of June 15th, the wind-up requires authorization from the New York bankruptcy court.

Fahrenheit is a group that includes the blockchain-based venture capital company Arrington Capital. In late May, the defunct crypto lender announced Fahrenheit’s proposal as the winning bid to manage a new entity to be owned by its creditors.

The venture capital firm will offer the funding, management team, and technology necessary to launch and operate the new company under the name NewCo.

As part of the Fahrenheit deal, the new firm will receive between $450 and $500 million in liquid cryptocurrency, and US Bitcoin Corp will build a range of crypto mining facilities including a new 100-megawatt plant.

New Jersey-based Celsius filed for Chapter 11 protection last July, one of several crypto lenders to go bankrupt during the COVID pandemic.

Two months later, Mashinsky, the CEO of Celsius, resigned from his position after acknowledging the organization’s poor asset deployment choices. Chris Ferraro, who had previously served as CFO was made the interim CEO.

The collapse of one of the leading crypto firms was attributed to problematic decisions and the then prevailing market conditions.

To recall, Celsius’ precarious condition was exacerbated by the LUNA’s fiasco coupled with an overleveraging issue, and the poorly executed WBTC and ETH/stETH positions that led to a total lockdown of their platform.

The firm made headlines again after kicking off an auction on April 22, as it looked for a buyer to save its bitcoin mining and crypto lending operations from bankruptcy.

Fahrenheit’s Acquisition Of Celsius- Terms & Conditions

Following Fahrenheit’s win, Celsius’s institutional loan portfolio, staked cryptocurrencies, mining units, and additional alternative investments would go to the former under the terms of the acquisition. Additionally, the group deposited $10 million to seal the deal.

As Celsius embarks on a new chapter with Fahrenheit, it’s vital for the two parties involved, the crypto industry, and especially others who are recovering from similar difficulties.

The Celsius Network bankrupt story nevertheless serves as a sobering reminder of how quickly things may turn out in the erratic world of cryptocurrency. After one year, the purchase of Fahrenheit gives the struggling business hope.

Celsius Gains A New Win Of $4.2B Worth Of Crypto

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According to WSJ, Celsius Network has now acquired ownership of the $4.2 billion in cryptocurrencies that its users have deposited with it. With this action, the bankrupt platform is now free to utilize the money in any way it sees fit. Notably, around 600,00 users of the Earn program were the owners of this fund. Customers were initially able to earn interest on their cryptocurrency deposits through this scheme.

The ruling stated,

“When the cryptocurrency assets (including stablecoins, discussed in detail below) were deposited in Earn Accounts, the cryptocurrency assets became Celsius’s property; and the cryptocurrency assets remaining in the Earn Accounts on the Petition Date became property of the Debtors’ bankruptcy estates.”

Celsius’ Customers Now Unsecured Debtors

As a result, Earn clients are now categorized under bankruptcy law as unsecured debtors. There won’t be enough money, according to the court record, to fully reimburse every customer. In order to recover 100% of their claims, clients will also need to “persuade the court that they are the owners of the bitcoin assets in their accounts.”

The decision even mentioned the platform’s decision to sell the $18 million in stablecoins it had stored in Earn accounts. States in the United States had fought to prevent this transaction, claiming that Celsius Network still had enough cash on hand to continue operating for a few more months. But even in this case, the judge ruled in Celsius’ favor, saying,

“It is unnecessary to resolve whether the proposed sale of stablecoins would be in the ordinary course of business because the sale should be approved outside the ordinary course of business.”

Notably, the cryptocurrency lending site failed in July 2022, one month after it stopped accepting withdrawals due to severe market conditions. The platform’s assets at the time were customer cryptocurrencies valued at $4.2 billion, but its liabilities were $5.5 billion. Additionally, as of September 2022, the stablecoin of the Earn program was valued at $23 million.

The handling of customer cryptocurrencies during bankruptcy proceedings in the US may be influenced by the outcome of this case. It should also be highlighted that Celsius is not the only cryptocurrency company presently facing bankruptcy in the US. Notably, FTX US was the most recent crypto platform to join the list of failed ones.

Crypto lender Hodlnaut deals with major layoffs along with police proceedings

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In a blog post published on Friday, Singaporean crypto lender Hodlnaut revealed significant layoffs and ongoing “police proceedings,” underscoring the precarious financial and legal predicament of the most recent company to suspend cryptocurrency withdrawals.

Hodlnaut said in the blog that in an effort to “stabilize our liquidity” and reduce costs, it let go 40 employees (or 80% of the workforce) and lowered interest rates to 0% APR. The company’s founders are still in Singapore and are “working hard on a recovery strategy.”

The cryptocurrency swap shop that pays interest claimed to be in “proceedings” with Singaporean authorities. Its blog kept quiet about the specifics but stated that the actions were taken to benefit users. Early in August, Hodlnaut froze the assets of those users; it is now looking for protection from its creditors.

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Source: Blog Post

Hodlnaut also withdrew its request for a licence from the Monetary Authority of Singapore, despite the fact that the central bank had given it in-principle approval in March.
The organization is the most recent in a long line of cryptocurrency lenders to falter this year due to market pressure, with Celsius Network and Voyager Digital both seeking bankruptcy protection. From more than $3 trillion in November, the total market valuation of cryptocurrencies has fallen to a little over $1 trillion today.

Along with Three Arrows Capital, Voyager Digital, and Celsius Network, Hodlnaut is one of the numerous cryptocurrency businesses that have failed due to depreciating market circumstances and collapsing businesses. Hodlnaut blamed “losses experienced” from the crash of TerraUSD in the blog post.

Hodlnaut seeks the appointment of a judicial manager

The Singapore High Court has received a request from the cryptocurrency lending platform to be placed under judicial management, which offers protection from creditors.
The application was submitted on August 13, 2022, five days after the corporation froze withdrawals, per a notice on Hodlnaut’s website. The application will provide the lender with a temporary barrier against any legal claims.

On August 22, 2022, the Singapore high court will hear the crypto lender’s request for legal protection. The company’s current directors may be replaced by an interim judicial manager who will be in charge of managing the company’s finances.

Crypto Lender Nexo Refutes Fund Misuse Charges; Releases Rebuttal Post

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Crypto Lender Nexo became a target of an online expose after a series of allegations emerged accusing the firm of misappropriating charity donations.

Denying the claims calling it ludicrous and defamatory, the lending platform shot out a cease and a desist notice to the anon accuser who goes by the name of Otteroooo.

Nexo also released a blog post addressing the same. In the post, the lending firm slammed the attack calling it “another smear campaign against the firm and profiting from short positions in a distressed market”.

It then offered a rebuttal to one of Otteroooo’s sensational charges that the founder of the charity HelpKarma Constantine Krastev and co-founder of Nexo “Konsta Kanchev” is the same person who is embezzling funds from donations to help build a palace instead of using the money for children’s medical treatments.

Nexo responded by saying that a “Konsta Kanchev” doesn’t exist and Otter purposely made the name “to mimic a typo as an excuse to fact-checkers” by confusing two separate people, HelpKarma founder Constantine Krastev and its own co-founder Kosta Kantchev, as the same.

It also posted screenshots of chat logs sent to Nexo by a person who attempted to buy Otteroooo’s account which the latter was apparently looking to sell his profile ‘for the right price.’

But on a June 26 Twitter thread posted by Otter, they countered the allegation by calling the messages to be a “set up” to force them into being silent.

Nexo Says This Isn’t The First Time

Two years back, the firm wrote that there was “a coordinated attack, using the same tactics as the present one – fabrication of lies, distortion of facts, and a massive social media campaign by anonymous trolls to link Nexo to the now infamous Zeus Capital report.”

An elaborate conspiracy theory was created to smear us and an intensive online harassing campaign against a researcher of ours, leaving the employee seriously traumatized.

Nexo concluded by saying that it would not only back down, but emerged stronger, and grow twenty-fold in size, assets, and reach. “We have done so before, we will do so again,” it added.