Crypto lender Celsius Network cleared to exit bankruptcy.

Crypto lender Celsius Network has received approval from a U.S. bankruptcy court for its restructuring plan. The plan will not only return cryptocurrency to customers but also create a new company that will be owned by Celsius creditors. The approval was granted by U.S. Bankruptcy Judge Martin Glenn in Manhattan. The reorganized business will be managed by Fahrenheit LLC, a consortium that includes Arrington Capital, a hedge fund. The new company will focus on mining new bitcoin and earning “staking” fees validating blockchain transactions.

Celsius Network, based in New Jersey, filed for Chapter 11 protection in July 2022 after freezing customer accounts to prevent withdrawals. Once valued at $3 billion, it was one of the largest crypto collapses last year. However, Celsius aims to emerge from Chapter 11 in early 2024 with the restructuring plan.

Unlike other crypto companies that collapsed in 2022 and failed to reorganize, Celsius has managed to revive itself. Crypto lenders BlockFi and Voyager Digital were wiped out in bankruptcy, while cryptocurrency exchange FTX remains stuck in Chapter 11 proceedings. Celsius Network’s revival is seen as a significant achievement.

As part of the restructuring plan, Fahrenheit will purchase a minority stake in the reorganized Celsius for $50 million. The new company’s stock will be publicly listed on Nasdaq, allowing Celsius customers to sell equity shares they receive as part of their bankruptcy recovery. Additionally, Celsius customers will receive a partial repayment of the cryptocurrency assets they deposited on the platform. Approximately $2 billion in cryptocurrency will be returned to account holders.

The restructuring plan also includes a settlement that values Celsius’s proprietary crypto token, CEL, at 25 cents. An examiner appointed by the court had previously reported that Celsius had inflated the value of its token to benefit company insiders, using methods described as “very Ponzi-like” by Celsius staff.

The reorganized Celsius company plans to pursue litigation against its founder, Alex Mashinsky, who is already facing U.S. criminal charges and a New York civil lawsuit. Mashinsky has been accused of misleading customers and artificially inflating the value of CEL. He has pleaded not guilty to the charges.

Crypto lender Celsius Network approval of its restructuring plan brings relief to its creditors and marks a significant milestone in its journey to recover from bankruptcy.