Celsius Network, a crypto lending company that collapsed amid the bear market of 2022, received approval yesterday from a Delaware bankruptcy court to reopen its doors and organize an internal restructuring plan.
The new company will be run by the Fahrenheit LLC consortium in a process that includes the creation of another entity, called NewCo, which will be listed on the Nasdaq stock exchange and will be responsible for maximizing remaining liquidity.
NewCo will be effectively owned by all Celsius creditors, who are expected to receive a mix of crypto and equity holdings in January 2024.
The CEL token could play a crucial role in the repayment plan that will be finally decided by early in the new year.
Meanwhile, the crypto itself returned to $0.3 amid BTC’s pump, before tracing back to near $0.25 where it currently sits.
Below are all the details of the affair.
Summary
Celsius receives a judge’s approval to restructure the company and plans to repay creditors with crypto and stock
Great news from Delaware: a bankruptcy court has granted Celsius Network’s request to emerge from bankruptcy and reorganize the company through the participation of Fahrenheit LLC, a consortium that also includes hedge fund Arrington Capital.
Celsisus had filed for bankruptcy by formally filing for Chapter 11 in July 2022, about a month after freezing its customer accounts valued at $3 billion at the time of the collapse.
After more than a year of litigation, US Judge Martin Glenn approved an internal restructuring plan in Manhattan that will officially kick off a new era for the crypto lender, which must, however, first repay all customers who lost their crypto funds in 2022.
Within this complex process, emerges the new entity NewCo, which, by listing on Nasdaq with an initial funding of $450 million, plans to maximize the remaining capital in Celsius’ coffers.
In total, the platform’s creditors will receive about $2.03 billion directly in crypto, while the remaining portion owed to investors will be paid precisely through equity shares in NewCo.
According to Bloomberg, repayments are expected to take place roughly in January 2024.
Fahrenheit LLC, which bought a minority stake in the Celsius restructuring, will play a crucial role in this matter as it will have to try to bridge the gap between the $3 billion Celsius owes and the approximately $2.5 billion actually in the company’s coffers.
In any case, the consortium thus gains one of the companies that made history in centralized staking during the last bull run, coming in to manage a maximum of $25 billion at its peak.
The package acquired, in addition to the Celsius name, includes a customer base of hundreds of thousands of users, which is an asset to be reckoned with.
Michael Arrington, founder of the hedge fund Arrington Capital (managed by Fahrenhiet LLC) commented on the news in an e-mail this way:
“Today marks the culmination of a journey that has been too long and too costly for Celsius’ creditors. We look forward to deepening our plan for the future to put things right for our creditors.”
Celsius is beating out other companies that fell into bankruptcy in 2022 such as BlockFi, Voyager Digital, and FTX, which still remain entangled in Chapter 11 court proceedings.
FTX is also considering restarting its crypto exchange business, but will first have to wait for official confirmation from a judge. Meanwhile, there are many companies vying for the burden and honor of running the new exchange.
CEL’s price manipulation during the past few years
The crypto lender Celsius’ reorganization plan theoretically includes an agreement that values the CEL token at $0.25, which is to be used likely as a crypto resource for the $2 billion to be repaid to creditors.
With regard to this cryptocurrency, it is interesting to recall that during the court cases brought against Alex Mashinsky, founder of Celsius, and Roni Cohen-Pavon, chief revenue officer of the same company, it emerged that CEL was artificially inflated throughout the 2020-2021 biennium.
In fact, its price was manipulated using methods that as described by Celsius’ own staff were “very Ponzi-like.”
The token had skyrocketed from $0.13 in March 2020 to its all-time high of $8 in the summer of 2021, fomenting crypto traders for the gains it had given them.
Now, however, having benefited from Bitcoin‘s recent rally, and the entire crypto market more generally, it is back to $0.25.
Truth be told, a few days ago CEL experienced a sudden pump that spiked it to $0.30 but it quickly returned to current prices.
The price action for Celsius crypto becomes extremely complex: the bullish momentum of the last few days is mainly motivated by external causes on which the bankruptcy affair has nothing to do.
Meanwhile, the positivism of the company’s stakeholders, who are waiting for nothing more than a restart of the platform, helped CEL’s price withstand yesterday’s short crypto market dump by bouncing the price on the daily EMA 50.
Should the token break above $0.275 it could easily register a further bullish extension to $0.35.
A fall below $0.2, on the other hand, could set the stage for another bearish winter, which could only be interrupted by Fahrenheit LLC’s restructuring plan.
At the moment, investing in CEL looks like a very risky deal, the success or otherwise of which depends on a multitude of variables that cannot be controlled by technical analysis.
When in doubt, it might be wise not to over-expose yourself to assets such as this, which could be the first to collapse if the bear market continues.
