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In a significant development for the distressed crypto lender Celsius Network LLC (CRYPTO: CEL), a bankruptcy court has sanctioned its proposal to reorganize into a Bitcoin (CRYPTO: BTC) mining business owned by creditors.
This strategy is designed as part of a comprehensive scheme to settle the accounts of clients, which have been inaccessible for over a year, Bloomberg reported.
As U.S. Bankruptcy Judge Martin Glenn endorsed the initiative, he highlighted the plan's intention to compensate customers via a mix of cryptocurrency assets and shares in the new, publicly traded Bitcoin mining entity.
This decision aligns with the pivotal discussions anticipated at Benzinga’s Future of Digital Assets conference, set for Nov. 14, which will delve into the evolving landscape of cryptocurrencies and their integration within the financial sector.
This breakthrough for Celsius, which faced financial collapse during a crypto market slump, has garnered support from its creditors for its Chapter 11 bankruptcy route, in spite of facing accusations of fraudulent activities by former chiefs.
Alex Mashinsky, the erstwhile CEO of Celsius, has been indicted on charges of inflating the value of the company's CEL token and presenting deceptive narratives to attract customer investments.
Mashinsky, maintaining his innocence, has entered a plea of not guilty.
Despite some customers expressing doubt, Celsius maintains that their transformation into a cryptocurrency mining operation is subject to the green light from the US Securities and Exchange Commission (SEC).
The contingency plan, should the mining endeavor not proceed, would be to consider liquidation.
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The approval of Celsius' restructuring plan culminates in a lengthy trial phase marked by customer testimonies challenging the new leadership and the bankruptcy strategy, particularly critiquing the undervaluation of the CEL token.
The token, according to the legal counsel of Celsius, had negligible worth at the time of the Chapter 11 filing, being likened to company equity, which typically becomes valueless in insolvency scenarios.
Judge Glenn has requested an expedited decision from the SEC on Celsius' bid to reemerge as a Bitcoin mining enterprise.
This move sidesteps the necessity for a court decision on whether the CEL token is a security, an intricate legal matter with far-reaching consequences for the regulatory framework of cryptocurrency in the United States.
This case is documented under Celsius Network LLC, 22-10964, in the U.S. Bankruptcy Court for the Southern District of New York (Manhattan).
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