Celsius says Bitcoin Mining is the key to debt restructuring
Celsius Network stated that bitcoin mining is the key to the cryptocurrency lender’s restructuring work when it received approval from a US bankruptcy judge to spend $ 3.7 million in construction costs on a new bitcoin mining facility.
Celsius’ hearing was conducted in a US bankruptcy court where the American bankruptcy judge Martin Glenn also approved $ 1.5 million in customs duties and taxes on imported bitcoin mining rigs for Celsius.
The crypto lender’s lawyer for the hearing, Patrick Nash, made a statement to Glenn and said that bitcoin mining could give a gateway to repay customers whose assets were frozen before the firm filed for bankruptcy.
“In a world where the crypto market is picking up again, mining has the potential to be quite valuable,” Nash said.
In its efforts to tackle bankruptcy and repay customers, Celsius also said – via one slide presentation posted on the company’s bankruptcy website – that options can be provided “at customers’ choice, to recover either cash at a discount or remain” long “crypto.”
The ability to repay customers with less than they owe in cash or ask them to remain as long-term crypto holders can 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 refund in US dollars or other fiat currency.
On behalf of Celsius, Nash said that some users may choose to receive cash, but that a “significant majority” will want 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 these owners may be treated as unsecured creditors.
According to a Blockchain.News report, the cryptocurrency lender froze all withdrawals and transfers about a month ago, citing unfavorable market situations when the cryptocurrency market plunged, cutting off access to savings for individual investors.
Celsius prevented 1.7 million customers from redeeming their assets by freezing withdrawals and transfers, prompting state securities regulators in New Jersey, Texas and Washington to investigate the decision.
According to Reuters, Celsius had around 23,000 outstanding loans to private customers as of 13 July. It added that the loans amounted to $ 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 US Bankruptcy Court for the Southern District of New York. However, a $ 1.19 billion deficit was noted on the company’s balance sheet the following day.
Celsius had positioned itself in the market by promising more than 18% in interest on people’s holdings that deposit digital coins. For its part, the cryptocurrency lender lent these coins, Bloomberg reported.
However, the crypto lenders’ business model was examined after a strong sale of the crypto market spurred by the collapse of large tokens terraUSD and luna in May.
The difficult crypto lender’s hopes now hang on to the mining work to help repair relationships with customers, but tThe company’s problems do not end with the new bitcoin mining initiative as a group of equity investors have anticipated a possible battle for control of bitcoin operations. One of the investors’ lawyers, Dennis Dunne, has argued that the extracted bitcoin should be the property of the British subsidiary that helped with the operation instead of being distributed for the benefit of all Celsius creditors.
More has not yet unfolded as cryptocurrency winter salaries continue and several crypto companies have either filed for bankruptcy or laid off employees.
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