- On November 9, the court cleared the crypto lender to exit bankruptcy and enact its recovery plans.
- On July 3, 2022, Celsius laid off 23% of its workforce and did not communicate on the foreign assets.
- The Celsius network has to return about $2 billion in cryptocurrency to all its former account holders.
The 2023 crypto market is filled with lows and a few highs. Since the FTX crashed, the industry has experienced one of its lowest points since Bitcoin’s debut. Many initially thought the prolonged crypto winter could eventually bring Bitcoin to its knees. Bitcoin reached its lowest valuation of below $15,000 since its peak in 2017. In addition, the US SEC and many regulatory bodies started a crackdown on suspicious crypto exchanges.
Furthermore, the after-effects of the FTX crash etched deep into many crypto traders who, in turn, effectively abandoned the industry. For a time, we genuinely thought the end was nigh for digital currency. Fortunately, the industry remained afloat with the interventions of organizations like Binance and Kraken, the unique approach of others like Tamadoge and Dogecoin, and the support from global payment systems like Visa, Mastercard, and PayPal.
In recent developments, Celicius Network, the crypto lender that contributed significantly towards the prolonged crypto winter, has achieved salvation. The US bankruptcy court has officially cleared Celsius Network to exit bankruptcy and given the green light for the crypto lender to restructure their organization.
Celsius Network gains the green light to restructure
The crypto industry has experienced a much-needed winning streak in the past few months. Bitcoin is gearing up to attain its $38,000 valuation, highlighting its much-anticipated Bull run. Ripple Exchange has made significant initiatives to regain its former glory after the US SEC dropped all allegations. In addition, Africa’s crypto ecosystem has improved, with countries like Kenya, Uganda, and South Africa making significant efforts to adopt web3 technology.
The industry is steadily reviving, and several regulatory bodies have doubled their efforts to establish clear crypto laws to govern their ecosystem.
Celsius Network, one of the foremost perpetrators of the crypto crash, has received some positive feedback. On November 9, the court cleared the crypto lender to exit bankruptcy and enact its recovery plans. According to the announcement, the company got approval from the US bankruptcy court to convert its business into a credit Bitcoin mining firm. Celsius Network has ascertained it will use this opportunity effectively and is gearing up to implement several strategic plans to merge from the Chapter 11 category in early 2024.
Michael Arrington, founder of Arrington Capital, stated that Celsius Network’s revival is plausibly compared to its companions during the crypto collapse of 2022. Unfortunately, crypto lenders BlockFi and Voyager Digital collapsed and could not recover. At the same time, the FTX saga drew its curtains after the US courts found Sam Bankman guilty of all accounts.
In an email, Arrington stated that his organization would work with the former bankrupt crypto lender to aid in its recovery attempts. He said, “Today marks the culmination of a journey that has been far too long and far too expensive for Celsius creditors. We are eager to dig in on our go-forward plan to make things whole for our creditors.“
The triumph of Celsius Network has also drawn in plenty of investors who seek to be part of their redemption arc. Fahrenheit, a consortium of buyers like VC firm Arrington Capital and US Bitcoin Corp, will buy a minority stake in Celsius’s restructured organization. The buyers intend to spend at least $50 million on the acquisition and publicly list its new stock on Nasdaq. This will enable the crypto lender’s customers to sell equity shares they will receive as part of their bankruptcy recovery.
In addition, the Celsius network will partially pay their clients a portion of their lost crypto assets. According to the court documents, the Celsius network has to return about $2 billion in cryptocurrency to all its former account holders. About 600,000 customers had held about $4.4 billion in interest-bearing during its fall—an amount the crypto lender could not repay.
The Timeline of the crypto lender’s fall
The downfall of Celsius Network took longer than its peer, FTX.
According to investigators, the fall of Celisuu Network ignited on April 12 when the crypto lender announced its US platform would hold non-accredited investor coins in custody. This announcement prevented any investor from adding new assets and earning more rewards. This abrupt decision sparked a few controversial opinions from the web3 community. However, what catalyzed the fall of the Celisius was the fall of LUNA and UST.
Its ripple effect accelerated a slow-paced crypto winter and forced Celsius Network into a liquidity crisis. On June 12, 2022, Celsius stopped its withdrawal, swap, and transfer functionality in response to the “extreme market conditions.” This further fueled the flames of suspicion and resulted in the freezing of the US SEC. By freezing at least 1.7 million accounts indefinitely, it prompted the regulatory body to launch an investigation into its workings.On July 3, 2022, Celsius laid off 23% of its workforce and did not communicate on the foreign assets. Unfortunately, the prolonged wait forced many of its clients to take legal action against the crypto lender. On July 7, 2022, Decentralized Finance (DeFi) aggregator KeyFi filed a lawsuit against Celisius, stating the organization engaged in market manipulation and failed to implement basic accounting controls. In addition, it became clear that the organization had a backlog of loans, further plunging its reputation into the mud.
The fate of the crypto lender was sealed on July 12 and 13 after they transferred $8.4 million in Circle’s USDC stablecoin to DeFi lending protocol Aave, closing Celsius’ loan. The remaining funds became collateral against Celisu’s debt. On July 13, Celisusu Network filed for Chapter 11 bankruptcy protection in the IS Bankruptcy Court.
The company wrote, “Today’s filing follows the difficult but necessary decision by Celsius last month to pause withdrawals, swaps, and transfers on its platform to stabilize its business and protect its customers,” the company wrote in a statement. Without a pause, the acceleration of withdrawals would have allowed specific customers – those who were first to act – to be paid in full while leaving others behind to wait for Celsius to harvest value from illiquid or longer-term asset deployment activities before they received a recovery.“
It has received a second chance at redemption. The company’s restructuring plan includes a settlement valuing Celsius’s proprietary crypto token, CEL, at 25 cents. After facing allegations of previously inflating its token, the crypto lender has assured that this time around, it will play by the books. This win for the crypto lender further proves the positive shift in the market and the entire ecosystem. At this pace, the web3 community can finally raise its head in a growing and expanding industry.