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Following a dramatic, rollercoaster year-and-a-half process, crypto lending platform Celsius announced Feb. 1 it successfully emerged from Chapter 11 bankruptcy.

NJBIZ has extensively chronicled the rapid rise and fall of the Hoboken-based company amid a riptide of challenges within the crypto space that knocked out several major players (see timeline below). Celsius underwent the Chapter 11 process as overseen by the Bankruptcy Court for the Southern of District of New York and in coordination with the Official Committee of Unsecured Creditors (UCC).

The company said it completed transactions under its confirmed reorganization plan, which was signed off on by the court and account holders whose funds were frozen when the platform ceased operations. That outline, Celsius notes, required consensus among a wide range of stakeholders while resolving complex novel legal issues, cooperating with regulatory investigations, and more.

Toplines of that plan include:

• Distributing more than $3 billion of cryptocurrency and fiat to Celsius’ creditors.
• Creating a new Bitcoin mining company, Ionic Digital Inc., that will be owned by Celsius’ creditors in the form of common stock.
• Cryptocurrency mining company Hut 8 Corp. will manage Iconic’s mining operations to continue delivering recoveries to creditors. It will also oversee Ionic Digital’s Bitcoin mining business under a four-year management agreement.
• Hut 8 Chief Commercial Officer Matt Prusak has been named CEO of Ionic Digital. He will work with the previously announced board of directors, a majority of which were appointed by the UCC.
• Ionic Digital stock is expected to be publicly traded once approvals are secured.

Exit strategy

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

“Our exit from bankruptcy is the culmination of an extraordinary team effort and extensive collaboration between Celsius, Hut 8, strategic partners, and our creditors,” said David Barse and Alan Carr, members of the special committee of the board for Celsius, who have overseen Celsius’ Chapter 11 process. “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.”

Barse and Carr noted several achievements during this process:

• Securing the cryptocurrency on its platform
• Achieving a settlement with the preferred shareholders
• Running a successful auction of the one reorganizable operating business to begin as a new Bitcoin mining company
• Establishing a litigation trust to pursue innumerable counterparties that exploited Celsius
• Settling with the Department of Justice, Securities and Exchange Commission and Commodity Futures Trading Commission

“But most of all, we are proud of the preservation and distribution of cryptocurrency assets and enhanced recovery for customers and claim holders,” they added.

According to Celsius, its next step is pursuing an orderly wind-down of operations, including discontinuing its mobile and web applications.

Quite an end for the once promising and booming company founded by Alex Mashinsky, who is now under indictment by the Southern District of New York (SDNY). Mashinsky faces a slew of charges, including securities fraud, commodities fraud and wire fraud for allegedly defrauding customers and misleading them about core aspects of Celsius.

“Exactly one year ago today, Celsius Network, a crypto platform that, at its height, managed approximately $25 billion in customer assets, filed for bankruptcy protection in the Southern District of New York,” said U.S. Attorney for SDNY Damian Williams at a July 2023 press conference. “Over the course of the past year, we have worked quickly to get to the bottom of what led to Celsius’ collapse and to understand how a platform that advertised itself as the ‘safest place for your crypto’ could have left investors holding billions of dollars in losses. Today we have the answer.”