Celsius Says Bitcoin Mining Key to Restructuring Efforts, Repaying Debts
Aaron Limbu Jul 19, 2022 09:10
Celsius Network received approval from a U.S. bankruptcy judge to spend $3.7 million in construction costs at a new bitcoin mining facility to generate 'revenue' to repay their creditors.
Celsius Network stated that bitcoin mining is the key to the cryptocurrency lender's restructuring efforts as it received approval from a U.S. bankruptcy judge to spend $3.7 million in construction costs at a new bitcoin mining facility.
Celsius' hearing was conducted at a U.S. bankruptcy court where U.S. Bankruptcy Judge Martin Glenn also approved $1.5 million on customs and duties on imported bitcoin mining rigs for Celsius.
The crypto lender's lawyer for the hearing, Patrick Nash, made a statement to Glenn saying that bitcoin mining could provide a gateway to repay customers whose assets were frozen prior to the firm's bankruptcy filing.
"In a world where the crypto market rebounds, the mining business has the potential to be quite valuable," Nash said.
In its efforts to tackle bankruptcy and repay customers, Celsius also said - via a slide presentation posted on the firm's bankruptcy website - that options might be provided "at the customers’ election, to recover either cash at a discount or remain ‘long’ crypto."
The option to repay customers with less than they are owed in cash or ask them to remain as long-term crypto holders may sit in the hands of the crypto lender if it uses its bankruptcy case.
When the Chapter 11 court hearing opened on Monday, Celsius made a promise not to force customers to accept any repayment in US dollars or any other fiat currency.
On behalf of Celsius, Nash said that some users may choose to receive cash recoveries but that a “substantial majority” will wish to ride out the crypto winter by remaining “long crypto.”
However, Bloomberg reported that Celsius’ terms of service state that digital assets owned by users are “unsettled” and “not guaranteed” in the event of insolvency - meaning that those owners may be treated as unsecured creditors.
According to a report Blockchain.News, the crypto lender froze all withdrawals and transfers around a month ago, citing unfavourable market situations as the crypto market plunged, cutting off access to savings for individual investors.
Celsius left 1.7 million customers unable to redeem their assets by freezing withdrawals and transfers, which has prompted state securities regulators in New Jersey, Texas and Washington to investigate the decision.
According to Reuters, Celsius had about 23,000 outstanding loans to retail borrowers as of July 13. It added that the loans totalled $411 million backed by collateral with a market value of $765.5 million in digital assets.
Celsius officially filed for Chapter 11 bankruptcy on July 13 at the U.S. Bankruptcy Court for the Southern District of New York. However, a $1.19 billion deficit was listed on the company's balance sheet the next day.
Celsius had positioned itself in the market by promising more than 18% in interest to peoples' holdings who deposit their digital coins. In turn, the crypto lender lent those coins out, Bloomberg reported.
However, the crypto lenders' business model came under scrutiny following a sharp crypto market sell-off spurred by the collapse of major tokens terraUSD and luna in May.
The embattled crypto lender's hope now hangs on its mining effort to help repair relationships with customers, but the company's troubles do not end with its new bitcoin mining initiative as a group of equity investors have previewed a possible fight for control over the bitcoin operations. One of the investors' lawyers, Dennis Dunne, has made an argument saying that the mined bitcoin should be the property of the UK subsidiary which helped in the operation instead of them being distributed for the benefit of all Celsius creditors.
More is yet to unfold as the crypto winter wages on and multiple crypto firms have either filed for bankruptcy or laid off employees.
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