Celsius Network, a major cryptocurrency lending company, has emerged from bankruptcy.
The company recently announced they would start returning over $3 billion to its creditors. This development marks a major milestone for the embattled company.
Background
Celsius filed for Chapter 11 bankruptcy protection in July 2022 amidst massive market turmoil. The company had over 1.7 million creditors to whom it owed nearly $5 billion at the time. Celsius cited "extreme market conditions" for its troubles.
Key Events
- June 2022: Celsius pauses withdrawals, swaps, and transfers on its platform due to extreme market volatility
- July 2022: Celsius files for Chapter 11 bankruptcy protection
- November 2022: Celsius announces reorganization plan
- January 2023: Celsius formally exits Chapter 11 bankruptcy
Bankruptcy Exit and Repayment Plan
On January 31st, 2023, Celsius announced it has formally exited bankruptcy after receiving court approval of its reorganization plan.
"This marks a significant milestone for Celsius and our community.Celsius CEO, Alex Mashinsky
As part of the approved plan, Celsius will repay its creditors and customers over time based on a tiered system:
- Tier 1 - Customers with $<100,000 in assets will be made whole
- Tier 2 - Larger customers will get a percentage repayment
It's estimated over $3 billion will be returned to creditors. Repayments have already commenced to Tier 1 users.
Estimated Creditor Repayments
Tier 1 (under $100k assets): 100%
Tier 2: 73%
Tier 3: 27%
Total: Over $3 billion
Celsius was able to raise exit financing and secure agreements which made this possible. This includes:
- $120 million in new capital
- Settling or assuming debts and liabilities
- Maintaining custody of remaining crypto assets
"We have the necessary foundation and resources to fully repay customers," stated Mashinsky.
Implications
The successful Celsius exit from bankruptcy protection is seen as a positive sign for the broader cryptocurrency industry. Other distressed crypto firms may follow a similar path toward rehabilitation.
However, many customers still sustained major losses from Celsius' troubles. And questions linger about transparency and communication failures. Regulatory oversight of crypto financial firms needs review in light of events.
Nonetheless, for its part, Celsius has conveyed hope about its future. Mashinsky concluded, "I look forward to leading Celsius into its next chapter."
The Celsius case reinforces that although risks exist with crypto lending platforms, recovery is achievable under the proper conditions. Their reemergence from bankruptcy is a noteworthy milestone.