Crypto Quill

Celsius, a crypto lending platform that filed for bankruptcy in July 2022, has announced that it will unstake its existing Ethereum holdings to facilitate the distribution of crypto assets to its creditors. The company said that the unstaking process will begin in the next few days and will unlock ETH to ensure timely distributions.

Celsius Unstakes ETH to Offset Costs and Repay Creditors

According to a tweet posted by Celsius on January 5, 2024, the company will unstake its existing ETH holdings, which have provided valuable staking rewards income to the estate, to offset certain costs incurred throughout the restructuring process. The company added that the liberated ETH will be used to unlock ETH to ensure timely distributions to creditors.

Celsius also reminded its creditors that they will receive in-kind distributions of Bitcoin (BTC) and Ethereum (ETH) as outlined in the approved plan. The company stated that it has started the process of recalling and rebalancing assets to ensure ample liquidity in preparation of any asset distributions.

Celsius Faces Liquidity Crisis and Fraud Charges

Celsius is one of the several crypto lending platforms that went bankrupt during the crypto market crash of 2022. The company faced a liquidity crisis due to the downturn in the crypto market, leading to a freeze on withdrawals. As a result, the company filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.

Since then, Celsius has been working towards a settlement plan that allows qualified users to withdraw 72.5% of their crypto holdings until February 28. Court documents from September revealed that approximately 58,300 users held a total of $210 million in what the court classified as “custody assets.”

Meanwhile, Alex Mashinsky, the founder and former CEO of Celsius, who is currently out on bail after being arrested on fraud charges, is scheduled to face a jury trial on September 17. Mashinsky is accused of misappropriating funds from Celsius and misleading investors about the company’s financial situation.

Celsius Shifts Focus to Bitcoin Mining

In November 2023, Celsius announced a scaled-back post-bankruptcy strategy focusing on Bitcoin mining. The company gained court approval to switch to a Bitcoin miner and create a public company dedicated solely to Bitcoin mining. According to the new arrangement, creditors will receive a portion of their recovery through shares in the upcoming Bitcoin mining company, which allows the creditors to benefit from the success and growth of the mining operations.

Furthermore, this plan unlocks $225 million in crypto assets that were initially intended to finance new ventures, but were rejected by the Securities and Exchange Commission (SEC). The newly formed entity, known as MiningCo, will be operated by Hut 8 under a four-year mining management contract. This agreement entails the supervision of five mining locations in Texas, which collectively possess a computing capacity of approximately 12 EH/s (equivalent to 122,000 miners) and over 300 MW of power.