US Bankruptcy Court Approves $225M ‘MiningCo Transaction’ for Celsius, Prevents Securities Ruling in Chapter 11 Proceedings

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Bankrupt cryptocurrency lending company Celsius Network has achieved a significant milestone in its Chapter 11 bankruptcy proceedings. The United States Bankruptcy Court for the Southern District of New York has granted approval for Celsius Network’s proposed “MiningCo Transaction” within the framework of its Chapter 11 bankruptcy proceedings.

On December 27, Chief Judge Martin Glenn, presiding over the case, issued the order approving the implementation of the MiningCo Transaction proposed by Celsius Network LLC and its affiliated debtors.

With the court’s decision, Celsius can now move forward with the transaction, directing its efforts towards stabilizing and restructuring the company’s operations through the establishment of “a public company exclusively dedicated to bitcoin mining.”

The MiningCo encompasses specific terms and conditions crucial to the restructuring plan. This involves capitalizing the new entity (NewCo) with $225 million in fiat and transferring specified mining assets to NewCo, excluding Core Rhodium, Mawson, and Luxor assets.

In a November court filing, Celsius outlined its plans to relaunch as a new entity referred to as “NewCo” until a permanent name is chosen. This newly formed enterprise, centered on staking and mining, is projected to have a $1.25 billion balance sheet with $450 million in liquid cryptocurrency, as detailed in a court filing. The company anticipates generating “$10 to $20 million per year” through staking crypto on the Ethereum network.

Furthermore, the court’s order greenlights modifications to the Management Agreement, establishing the initial term at four years with provisions for extension or early termination.

Suppose NewCo’s mining capacity fails to reach the specified Exahash target of 23 EH/s within the initial three years. In that case, NewCo reserves the right to terminate the agreement without an early termination fee, subject to a six-month transition period. Notably, Fahrenheit also agreed to buy a $50 million minority stake in the new company and to list those shares publicly so Celsius customers can sell their stakes and recuperate more of their losses.

Celsius Network Faces New Guidelines for Operational Wind-Down and Creditor Payouts Following Court Ruling

The court ruling has nullified previous agreements related to the handling of unsecured claims for Celsius following its Chapter 11 filing in July 2022. The court’s order explicitly states that all prior Unsecured Claim Distribution Mix Elections are now null and void, resetting the guidelines for the company’s operational wind-down and creditor settlements.

Additionally, the court has sanctioned the “Wind-Down Budget and Procedures,” outlining crucial expenses for the orderly execution of the plan, totaling approximately $70 million.

It’s important to note that the court’s ruling does not impact the Securities and Exchange Commission’s (SEC) rights concerning crypto tokens. The order specifies that it should not be construed as a determination under federal securities laws regarding the status of crypto tokens or related transactions. This provision preserves the SEC’s authority to challenge transactions involving crypto tokens, and the Court retains exclusive jurisdiction over matters arising from or related to the implementation of this order.

Celsius, once valued at $3 billion, faced financial difficulties and froze customer accounts in 2022, resulting in one of the largest crypto collapses of the year. The approved MiningCo Transaction is expected to be a significant factor in reshaping the company’s trajectory in the months ahead.

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