Crypto lender Celsius had its bankruptcy plan approved by a judge Thursday, and the company said on Twitter it expects to emerge from bankruptcy early next year.
Judge Martin Glenn of the Southern District of New York Bankruptcy Court issued an order Thursday supporting Celsius’ plan to create a new company focused on crypto mining and staking to repay customers.
Under the plan, approximately $2 billion in cryptocurrency will be distributed to Celsius creditors, who will also be partially repaid in stock of the new company, dubbed NewCo in court filings.
Glenn’s order also puts control of Celsius’ reorganization hereafter to Fahrenheit Holdings, which won the bid to acquire Celsius in May.
The once-$25 billion firm filed for bankruptcy in July 2022. Then-CEO Alex Mashinsky had previously touted Celsius as “safer than a bank” and promised high yields. Reports of clients having problems accessing funds emerged more than a month before the bankruptcy filing, but Mashinsky vehemently denied them on a June 10 YouTube livestream.
“Celsius has billions in liquidity, right, and we provide immediate access to everybody,” he said, suggesting that Celsius’ critics were being funded by competing firms.
Three days later, the exchange paused withdrawals, citing “extreme market conditions.”
In July, Celsius agreed to pay $4.7 billion in a settlement with the Federal Trade Commission that would permanently ban the crypto exchange from “offering, marketing or promoting any product or service that could be used to deposit, exchange, invest or withdraw any assets.”
Incidentally, the settlement matched the amount owed to Celsius’ roughly 1.7 million customers whose assets were stuck on the exchange.
Mashinsky was arrested on charges of securities, commodities and wire fraud, and for allegedly manipulating the price of his exchanges native token, CEL.
“This case, like the others my Office has recently announced alleging fraud in the crypto economy, may appear complicated. But the message we send today is quite simple: if you rip off ordinary investors to line your own pockets, we will hold you accountable,” U.S. Attorney Damian Williams said in a prepared statement. “Whether it’s old-school fraud or some new-school crypto scheme, it doesn’t matter one bit. It’s all fraud to us. And we’ll be here to catch it.”
Mashinsky pleaded not guilty and was released on $40 million bond.
In August, a federal judge ordered a freeze on Mashinsky’s assets and property following a motion from the Department of Justice, a court document shows. He will face trial in September.