Celsius To Return of Customer Funds, Begins Mining Company

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Last updated Feb 02, 2024 | 12:09 PM UTC

Celsius is set to return over $3billion in customer funds and begin the creation of a new Bitcoin mining company that creditors will also have a stake in. This is according to an announcement this week following the official end of the firm's bankruptcy woes.

Favorable outcome for creditors

As per an official press release from Celsius, the firm has emerged from bankruptcy with its reorganization plan being approved. It will now move forward with returning creditors funds, as well as the creation of its new BTC mining company, Ionic Digital, which will be in-part owned by Celsius’s creditors and managed by mining firm Hut 8.

Celsius tweet
Celsius creditors were given approval to vote on the reorganization plan in August 2023, with court filings estimating that creditors may receive 67% to 85% of their funds under this plan. Around 98% of creditors approved.

Chris Ferraro, plan administrator and former chief restructuring officer, said: “ [...] over 18 months after Celsius paused withdrawals, we began distributing over $3billion of cryptocurrency, fiat, and stock in Ionic Digital to Celsius creditors.” 

Celsius has stated

Twitter that it will be providing further details on the distribution process “in the coming days”.

Bitcoin mining to commence

As part of the Celsius plan, Hut 8 will facilitate end-to-end managed services across all of Ionic Digital’s Bitcoin mining operations.

Speaking on the development of the Ionic Digital mining company, Hut 8 explained: "Hut 8 will oversee approximately 127,000 miners with nameplate hashrate of approximately 12 EH/s and more than 300 MW of energy infrastructure in year one of the managed services agreement.”

Under this agreement, Hut 8 predicts that it will earn upwards of around $81.5m over a four year period, and is required to purchase over 600,000 shares in Ionic Digital.

A good ending?

For Celsius, this resolution is considered to be a particularly positive outcome given the current state of other major legal battles going on in the crypto space such as the bankruptcy of FTX.

Celsius tweet

With FTX, creditors are still battling to receive their assets in full, as opposed to the proposed plan to return funds denominated in fiat based on the value at the time, which has left customers feeling short-changed by the firm.

The men guiding Celsius through their Chapter 11 battle, David Barse and Alan Carr, members of the Special Committee of the Board of Celsius, stated: “When we were appointed in June 2022, everyone assumed Celsius would disappear completely like the other crypto lenders that were filing bankruptcy around the same time.”

Instead, Celsius proposed a plan and creditors have opted to be paid back a percentage of funds, depending on certain criteria, as well as allow particular creditors to be stakeholders in the new mining company.

Crypto clean up

These have been some legally intensive years for the crypto industry, and for better or worse, it has begun to establish a legal precedent that had been lacking in the industry. Despite all the regulatory oversight available, some of the largest crypto exchanges and projects in the world were being operated by extremely irresponsible, or downright criminal, people.

The fall of FTX and Sam Bankman-Fried (SBF), the guilty plea of Binance, Changpeng Zhao, and his subsequent resignation, the Terra Luna debacle, and others have given lawmakers and regulators a lot of work to do. 

Moreover, they’ve crushed confidence in a market and technology that set out to create a better financial system. But, all hope is not lost, as evidenced by the fact that the Celsius reorganization plan has proven favorable with creditors, and will even see the creation of a brand new Bitcoin mining company.

If the plan is a success, Celsius may be a new standard bearer for embattled crypto firms who for one reason or another now owe billions of dollars to their customers, offering an amicable resolution for all those involved.

Written by

Eddie is a seasoned crypto writer and Bitcoin maximalist.