Formerly bankrupt Bitcoin mining firm Celsius Network announced it is now emerging from bankruptcy to distribute over $3 billion to its creditors in a press release published on Business Wire on January 31, 2024. The announcement comes after Judge Martin Glenn approved the firm’s reorganization plan late last year. The plan would see Celsius repay creditors in Bitcoin, Ethereum, and shares of a new mining operation. Celsius Network owed creditors billions of dollars before its unfortunate shutdown during the 2022 crypto winter.
Recall that the Celsius Network filed for a Chapter 11 bankruptcy in July 2022 after freezing withdrawals, swaps, and transfers on its lending platform. The firm eventually declared it had $4.3 billion in assets against $5.5 billion in liabilities, leaving a $1.2 billion hole in its balance sheet and rendering it insolvent.
What Happened to Celsius?
At its peak, Celsius Network managed over $25 billion for over 1.7 million users but started facing difficulties after the infamous Terra/Luna crash of 2022. While the firm was careful not to mention Terraform Labs earlier in its bankruptcy journey, it would later blame its fall on the domino effect of the Luna implosion.
Fears that Celsius is becoming insolvent spurred the panic-withdrawing of digital assets before the bankruptcy, forcing the platform to (temporarily) pause withdrawals. It would later make the withdrawal pause permanent, fueling fears that the company is becoming insolvent.
As users rightly predicted, Celsius Network filed for Chapter 11 just one month later and hired two restructuring experts, Alvarez and Marsal, to get the company back on track. The outcome of the duo’s labor over the previous year is the recently announced program on the Celsius Network.
Celsius-Creditors to Own Ionic Digital
The platform will create a new creditor-owned crypto mining company (Ionic Digital) as part of plans to repay creditors. According to the new press statement, Hut 8, an industrial Bitcoin mining operation in Canada, will manage the operations of the new mining firm.
Ionic Digital will be a publicly traded firm. Furthermore, existing Celsius Network shareholders will own equity in the company as common stock. The statement did not clarify stock allocations to investors, but we expect a proportional distribution based on the sizes of their loans to the platform.
Celsius Shuts Down Operations, Names New CEO for Spinoff Firm
Celsius Network will expectedly shut down after paying creditors, with Ionic Digital remaining as its only functional spinoff. The shutdown will involve discontinuing mobile and web apps. Celsius Network’s website currently carries a message about the ongoing Chapter 11 proceedings to inform creditors about the progress of the process.
In related news, Matt Prusak, the former Chief Commercial Officer of Hut 8, has been named the new CEO of Ionic Digital. Recall that Celsius Network signed a four-year agreement with Hut 8 to manage its new Bitcoin mining operation, a deal that saw the latter install its former CCO as the new CEO of Ionic Digital.
Before his appointment to Ionic Digital, Matt worked as Chief Business Officer at Curative before moving to US Bitcoin Corp. After Bitcoin Corp’s merger with Hut 8, Prusak retained his CCO position until his eventual appointment to CEO at Celsius Digital’s new offspring.
Matt Prusak will now work with a board of directors appointed by the Official Committee of Unsecured (Celsius) Creditors to manage the new Bitcoin mining firm until Hut 8’s four-year agreement runs out.
Celsius Network Spinoff is Set to Begin Operations
In a (separate) press release by Ionic Digital on February 1, 2024, the company announced its commencement of Bitcoin mining operations after setting up a mining facility expected to achieve a hash rate of 12.7 exahash per second. To show off its state-of-the-art facilities, Ionic Digital announced the acquisition of 127,000 Bitcoin machines and 142 megawatts worth of mining power on hosted third-party sites. At its capacity, the company is reportedly among the largest of its kind on the North American continent.
Commenting on the development, Ionic Digital CEO Matt Prusak reinforced his vision of not repeating Celsius Network’s mistakes, promising to “do what is right for shareholders.”
“We want Ionic to be a company that believes in transparency and doing what is right for our shareholders,” the CEO partly said in the statement introducing Ionic Digital on Thursday.