- Celsius Network refocuses its post-bankruptcy strategy, narrowing its business scope to concentrate exclusively on bitcoin mining.
- Following approval of its Chapter 11 plan, Celsius adapts to SEC feedback, opting for a strategic pivot that prioritizes bitcoin mining as the cornerstone of its reorganized business.
- The move is expected to result in a more streamlined operation, reducing management fees and increasing the direct return of cryptocurrency to customers.
In a notable move post-bankruptcy, Celsius Network has streamlined its focus, choosing to concentrate exclusively on bitcoin mining. This shift comes in response to regulatory reservations about its other planned business ventures.
Restructuring Plans and Regulatory Feedback
Originally, Celsius had envisioned a multifaceted approach, including earning “staking” fees through blockchain transactions and managing its existing cryptocurrency loan portfolio. However, a statement released late Monday revealed a change in direction following feedback from the U.S. Securities & Exchange Commission (SEC).
SEC Response and Bankruptcy Court Approval
The SEC, during Celsius’ bankruptcy case, did not definitively comment on whether the new company’s plans would violate U.S. law but reserved the right to make that determination later. Nonetheless, a U.S. bankruptcy court in Manhattan approved Celsius’ Chapter 11 plan on Nov. 9, allowing the return of cryptocurrency to customers and the creation of a new company owned by Celsius creditors.
The SEC, in previous public statements, has advocated for the regulation of most crypto lending and staking activities to ensure customers have adequate information about their crypto assets’ utilization. Celsius, in response, has decided to hold back certain assets initially slated for transfer to the new company, choosing instead to liquidate them as part of the bankruptcy wind-down.
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Negotiations with Fahrenheit
Celsius emphasizes that bitcoin mining was always intended to be the “core business” of the new company, reinforcing its commitment to this strategic pivot.
This shift in focus has triggered further negotiations with Fahrenheit, a consortium led by Arrington Capital and U.S. Bitcoin Corp. Celsius anticipates seeking court approval for a modified bankruptcy plan in the coming weeks. However, Fahrenheit has not provided an immediate response to Celsius’ revised direction.
Impact on Management Fees and Customer Returns
Celsius anticipates that the “reduction in scope and scale” of the new company will result in lower management fees. Furthermore, this adjustment is expected to increase the amount of cryptocurrency directly returned to customers starting in January 2024.
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Background and Challenges Leading to Bankruptcy
Celsius, based in New Jersey, filed for Chapter 11 protection in July 2022, a month after freezing customer accounts. Complicating matters, the SEC filed a lawsuit against Celsius and its former CEO, Alex Mashinsky, over allegations related to the firm’s Earn Interest Program. Mashinsky, currently out on bail, faces charges of securities fraud, commodities fraud, and wire fraud. His trial is scheduled for September 2024.
The collapse of Celsius can be attributed to complications arising from Mashinsky’s trading decisions, mismanagement of $2 billion in assets, and inadequate tracking systems. Mashinsky, at the time, attributed the collapse to the rapid growth of Celsius’ assets, outpacing the company’s ability to make prudent investment decisions.
Final Takeaway
Celsius Network’s move towards bitcoin mining is a step towards revamping the company while still facing regulatory challenges. This focused approach, coupled with ongoing negotiations with the Fahrenheit consortium could mark a new beginning for the company.
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