Celsius Picks Fahrenheit As Its Saviour
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The insolvent crypto lending company Celsius picks Fahrenheit as its savior. In an announcement made on Thursday, May 25, 2023, Celsius officially named Fahrenheit its ticket out of bankruptcy after a year of financial decline for the company.
A competitive three-way auction determined which company would take over Celsius’ financial burden. The month-long auction began in April 2023 and featured bids from the Blockchain Recovery Investment Committee (BRIC), Fahrenheit Crypto Consortium, and crypto asset manager NovaWulf.
Why Did Celsius File for Bankruptcy?
On June 12, 2022, the New-jersey-based Celsius Network informed its stakeholders that it was pausing all withdrawals, transfers, and swaps between customer accounts. The statement came after the firm grew increasingly incapable of meeting customers’ redemption requests. Shortly after this announcement, Celsius and its affiliates voluntarily filed for Chapter 11 bankruptcy.
The bankruptcy plea, heard and granted in the U.S. Bankruptcy Court in New York’s Southern District, allowed the company to search for a buyer through an auction to ensure it could repay its debtors.
When filing for bankruptcy, Celsius had approximately 100,000 debtors and liabilities ranging from $1 – $10 billion. Conversely, the company only had $167 million in cash on hand.
What Will Transition From Celsius to Fahrenheit Entail?
Crypto companies are still novel concepts. This means there’s little legal documentation on how to handle events such as insolvency. However, using existing laws on insolvent institutions, several steps must be followed before Fahrenheit can assume full financial responsibility over Celsius.
The first step will be to listen to the court’s verdict on the bid. Although Celsius and its creditors have approved the bid, the U.S. Bankruptcy Court that received the application must give regulatory approval.
To gain approval, Fahrenheit, under the governance of the U.S. Bitcoin Corp. and Arrington Capital, will have to pay a $10 million deposit within three days. Failure to achieve this will result in the bid being handed over to BRIC, a Gemini Foundation holding company.
However, if approved, “Fahrenheit will provide the capital, management team, and technology to establish and operate the new company (NewCo).” Celsius’ statement adds that “Celsius’ account holders will own 100% of the new equity in NewCo,” it said, adding that NewCo will be overseen by a new board of directors, a majority of which will be appointed by creditors.”
NEW ARTICLE:
Celsius Announces Fahrenheit, LLC as Winning Bidder to Manage New Entity to Be Owned by Celsius CreditorsWinning bid positions Celsius’ assets to be transferred to “NewCo” under new executive leadership. Auction results in the distribution of hundreds of millions… pic.twitter.com/7SgW9aKbKb
— Celsians (@CelsiansNetwork) May 25, 2023
At this point, Fahrenheit will take control of Celsius’s institutional loan portfolio. This will include mining units, staked cryptocurrencies, and other investments. NewCo. will also receive $450 to $500 million in liquid cryptocurrency from Fahrenheit and benefit from a new 100-megawatt crypto mining facility supported by U.S. Bitcoin Corp.
Will Celsius Account Holders Benefit From Move to Fahrenheit?
Although Fahrenheit has yet to receive legal approval to take over Celsius, the move, if approved, will be a massive relief for Celsius account holders. Celsius’ insolvency hindered many investors from accessing the funds they invested on the platform. It also spelled doom for the future of the company and its services.
But, through the move, Celsius account holders can retrieve their assets. Additionally, Celsius services will resume and maybe even improve because of extra perks like the crypto mining facility that comes as part of the bid package.
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