May 29, 2024
Celsius Network's Bitcoin Mining Pivot Faces Creditor Scrutiny
Bitcoin News

Celsius Network Considers Vote on Bitcoin Mining Transition Amid Bankruptcy Proceedings

Celsius Network, a platform for lending cryptocurrency, may need to seek a fresh vote from creditors for its intended transition to a Bitcoin mining venture, following a suggestion from a U.S. bankruptcy judge during a recent court session. The crypto lending entity disclosed on November 30 its plan to solely engage in Bitcoin mining upon emerging from bankruptcy, a downsized approach aligned with regulatory guidance.

Judge Martin Glenn, presiding over Celsius Network’s Chapter 11 proceedings, expressed dissatisfaction on November 30 regarding the abrupt shift, emphasizing prior advisories to Celsius about the necessity of reaching an agreement with the SEC.

Judge Glenn underscored that the proposed shift towards a Bitcoin mining venture significantly diverges from the deal creditors initially agreed upon, potentially facing substantial opposition from them.

Celsius recently revealed a scaled-down strategy post-bankruptcy, narrowing its focus to Bitcoin mining due to the U.S. Securities and Exchange Commission’s skepticism about its original business plans. Although the SEC didn’t outright oppose Celsius’ bankruptcy plan, the company indicated that the agency was hesitant to endorse crypto lending and staking, activities it had previously disapproved of.

During the court session, Celsius attorney Chris Koenig argued that the court-approved bankruptcy plan allowed the company to transition to an exclusive mining business. Koenig asserted that a new vote was unnecessary as the revised deal was equally advantageous for creditors.

According to the report, two customers, representing themselves without legal representation, expressed disagreement with the agreement in court documents, arguing that Celsius should undergo complete liquidation instead. Celsius filed for Chapter 11 protection in July 2022, becoming one of several crypto lenders to declare bankruptcy following the industry’s rapid expansion during the COVID-19 pandemic. Koenig outlined that the updated Celsius plan frees $225 million in cryptocurrency assets from the control of external investors, known as the Fahrenheit consortium.

Under the new proposal, Celsius creditors are expected to receive a 67% recovery, surpassing the 61.2% from the previous Fahrenheit arrangement, according to court records. In the revised bid, the post-bankruptcy Bitcoin mining venture for Celsius will be managed by U.S. Bitcoin Corp., a consortium member alongside Arrington Capital.

Image by freepik

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