Celsius will pledge $470 million in ETH to repay creditors
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Bankrupt cryptocurrency lender Celsius Network revealed today that it plans to sell off its existing Ethereum holdings in preparation for quick distributions to creditors.
Since filing for Chapter 11 bankruptcy protection in July 2022, lending company Celsius announced on January 5 the launch of an asset reallocation to ensure sufficient liquidity before potentially distributing funds to creditors.
Celsius also announced plans to unstake its current holdings of ether (ETH), which have been generating significant staking reward revenue for the industry.
The issuance of Ethereum is intended to cover various expenses incurred during the restructuring process and speed up distribution to creditors.
The decision is a positive development for Celsius customers, who have been waiting for the return of their funds for more than a year and a half. Under Celsius’ recovery plan, creditors will receive Bitcoin (BTC) and/or Ethereum as part of the settlement.
Blockchain analytics firm Nansen reported that Celsius currently holds about 32% of Ethereum and is currently in the withdrawal queue, totaling 206,300 ETH, worth about $468.5 million.
The company also noted that Celsius has withdrawn 40,249 ETH to date, with 19,906 validators waiting for full withdrawals.
While some worry that large-scale divestments from Ethereum could negatively impact its market value, others believe As the Celsius reorganization progresses, it will have a positive impact on Ethereum’s long-term prospects.
Celsius began its journey toward bankruptcy in July 2022 after the downturn in the cryptocurrency market triggered a liquidity crisis. This resulted in a freeze on withdrawals and ultimately a filing for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.
Celsius has since been working on a settlement plan that would allow qualified users to withdraw 72.5% of their cryptocurrency holdings by February 28. Court documents from September showed that about 58,300 users held assets totaling $210 million in “custodial assets.”
Celsius Network founder and former CEO Alex Mashinsky was arrested on fraud charges and is currently free on bail. His trial is scheduled for September 17.
Celsius moves into cryptocurrency mining business
Last month, Judge Martin Glenn authorized Celsius Network to implement an alternative plan that had previously been approved by creditors, involving the formation of a new public company focused on Bitcoin mining.
Celsius’ creditors will be partially compensated through shares in this new Bitcoin mining venture, aligning their interests with the success and expansion of mining operations. The approach also unlocked $225 million worth of cryptocurrency assets that were originally earmarked for other projects but rejected by the SEC.
The new company, called MiningCo, will be managed by Hut 8 under a four-year contract and will focus on mining operations.
The deal includes management of five mining facilities located in Texas with a combined computing capacity of approximately 12 EH/s, equivalent to 122,000 miners, and a total energy output of over 300 megawatts.
MiningCo will focus on staking and mining activities and is expected to have a balance sheet of $1.25 billion, including $450 million in readily available cryptocurrency assets.
According to court documents, the company aims to generate annual profits of $10 to $20 million by staking cryptocurrencies on the Ethereum network.
