Celsius’ ETH sales raise cash, eyebrows from creditors

Celsius creditors want their crypto returned ahead of the bull market as part of the firm’s exit from bankruptcy

share

Bankrupt crypto lender Celsius could exit bankruptcy as early as January, if stakeholders agree to move forward on a court approved plan.

Ethereum chain watchers observed the wallets belonging to the debtors have sold close to $250 million in ether in recent months, an amount that roughly matches the expected capital needs of the entity, known as MiningCo, that would emerge from bankruptcy. 

The recent developments in the Celsius case reveal a shift in the company’s post-bankruptcy business plans, primarily influenced by regulatory considerations and the need to satisfy creditor claims.

Initially, the restructuring plan for Celsius included not only bitcoin mining but also “staking” fees generated by validating blockchain transactions, and by managing its legacy portfolio of cryptocurrency loans.

This plan was spearheaded by Fahrenheit, also known as NewCo, a consortium led by Arrington Capital. The group was initially selected to lead the reorganized company as part of Celsius’ exit from bankruptcy, and acquired a minority stake in the reorganized Celsius, for $50 million, with the intent to list the new company’s stock on Nasdaq exchange.

However, this initial plan faced scrutiny from US regulators, specifically the Securities and Exchange Commission, which led to a pivot in strategy​​​​.

Read more: Celsius Network payment plan approved by New York judge, now it’s up to the SEC

The SEC’s skepticism about some of Celsius’ planned business lines, particularly around crypto lending and staking activities, prompted Celsius to refocus solely on bitcoin mining. 

Consequently, Celsius decided to hold back certain assets that would have been transferred to the new company under the initial plan and instead liquidate them as part of winding down its bankruptcy.

Loading Tweet..

Sales of ether (ETH), including Celsius’ recent transactions, appear to be part of that broader strategy, under which Celsius should also distribute approximately $1.98 billion in the form of ether and bitcoin to creditors.

‘Creditors’ losses were crypto losses, not dollar losses’

In a letter to the bankruptcy judge, Tuesday, major creditor Simon Dixon argued that there are no “viable alternatives to the MiningCo transaction before the court,” and therefore it should proceed unhindered.

Dixon, who has personal and business claims against Celsius amounting to about $20 million, expressed concerns that the court could be considering seeking additional approval or consent again from the stakeholders for a revised exit proposal.

He worries that this “re-solicitation” would waste time and money and “could ultimately result in the rug pull scenario happening.”

Loading Tweet..

In the context of bankruptcy litigation, a “rug pull” metaphorically describes a situation where stakeholders expect a certain resolution or benefit from the bankruptcy process, but due to unforeseen complications or delays, these expectations are not met.

For Celsius’ creditors, that could mean they would fail to benefit from the rising market price of crypto assets, Dixon explained in the letter.

“As of the Petition Date, the bankruptcy fixed the value of crypto in dollar terms. However, creditors’ losses were crypto losses, not dollar losses,” he wrote.

As the price of bitcoin rises, ordinary depositors and users of Celsius could expect to recover 100% of their losses in US dollar terms, but any surplus value would, paradoxically, flow to subordinated claims.

“If the price of Bitcoin rises only 25%, or to approximately $54,000/per BTC, the risk will become a reality,” Dixon said.

Loading Tweet..

According to Jed Breed, founder of venture firm Breed, the debtors’ sales of ether may have run their course.

“The ultimate goal is to return to Celsius customers as much funds as possible and I hope whatever direction this bankruptcy goes that happens,” Breed said on X.

A hearing with Chief Judge Martin Glenn is scheduled for Thursday to consider the next steps.


Start your day with top crypto insights from David Canellis and Katherine Ross. Subscribe to the Empire newsletter.

Explore the growing intersection between crypto, macroeconomics, policy and finance with Ben Strack, Casey Wagner and Felix Jauvin. Subscribe to the Forward Guidance newsletter.

Get alpha directly in your inbox with the 0xResearch newsletter — market highlights, charts, degen trade ideas, governance updates, and more.

The Lightspeed newsletter is all things Solana, in your inbox, every day. Subscribe to daily Solana news from Jack Kubinec and Jeff Albus.

Tags

Upcoming Events

Javits Center North | 445 11th Ave

Tues - Thurs, March 18 - 20, 2025

Blockworks’ Digital Asset Summit (DAS) will feature conversations between the builders, allocators, and legislators who will shape the trajectory of the digital asset ecosystem in the US and abroad.

recent research

kamino cover.jpg

Research

Kamino has solidified its position as the leading money market on Solana and is emerging as a DeFi bluechip. Although DeFi competition is fierce, Kamino has kept iterating on its product to provide the best-in-class UX, paired with a robust risk management framework and battle-tested infrastructure. Given the rollout of Kamino Lend V2, the protocol may scale aggressively over the coming months, penetrating previously untapped markets in Solana DeFi.

article-image

Why that the bull market might not start until 2025

article-image

August’s annual headline figure came in at 2.3% after an upward revision Thursday, so things are moving in the right direction 

article-image

MSTR’s stock price was roughly $248 at 2 pm ET Thursday

article-image

Ever since rates came off zero and fiscal deficits exploded, markets have started paying close attention to how the government is funding itself

article-image

Solana memecoins are collectively at an all-time high

article-image

Optimistic rollups like Optimism, Arbitrum and Base are seeing rapid adoption relative to zk rollups