Celsius Permitted to Operate BTC Mining and Selling Operations by Bankruptcy Judge

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LeoFinance
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"Not even 24 hours after revealing a three-month cash flow forecast that threatens total exhaustion of funds, a New York judge allowed crypto lender Celsius Network to mine and sell Bitcoin (BTC) during its bankruptcy" [Sarkar, A. For greater good: NY judge allows Celsius to mine, sell Bitcoin. (Accessed August 17, 2022)].


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While the process is expected to reinstate financial stability for the beleaguered platform, Chief US Bankruptcy Judge Martin Glenn believes Bitcoin mining would not bring profits immediately to the table since Celsius needs to make additional investments to set up mining infrastructure. On the second day of the hearing, the Judge, nevertheless, said he would respect Celsius’ business decision and allow it to proceed. The crypto lender, on multiple occasions, had reaffirmed that Bitcoin mining remains one of the crucial focus areas in its restructuring process.

[Deka, C. NY Judge Allows Celsius to Sell the Bitcoin it Mines. (Accessed August 17, 2022)].

Celsius attorney Ross Kwasteniet of Kirkland & Ellis acknowledged the initial stage of the mining operation would lose money, but said at the hearing that the company is close to turning the corner and making a profit after investing considerable resources in buying computers and building facilities for the mining operation. The U.S. Department of Justice and the Texas State Securities Board had opposed Celsius' spending on the mining operation, but the Texas SSB withdrew its objection after Celsius clarified that it would only sell the mined bitcoin for cash, rather than using it as collateral for further loans.

[Knauth, D. Crypto lender Celsius gets court sign-off to sell bitcoin, but not stocks or debt. (Accessed August 17, 2022)].

It must be stressed that this approval by the Bankruptcy Court was specifically limited to the mining of BTC and the selling of the BTC it mined by Celsius. Regarding Celsius selling equity or debt issues in outside cryptocurrency firms, the Court found more transparency was needed requiring Celsius to submit asset information in advance.

More specifically, "... the Judge did not grant the company’s separate request to make 'de minimis' sales of assets that it did not consider to be at the center of its business. According to Glenn, Celsius was 'too vague' about the assets that it intended to dispose of and divulged details regarding it very recently. The assets in question include up to $210 million in equity and debt investments in other crypto companies" [Deka, supra]. In this regard Judge Glenn stated: "Certainly I had no inkling that Celsius was thinking of selling investments in equity and debt of other crypto companies,' Glenn said. 'Those are not what I would ordinarily consider to be 'de minimis' assets" [Knauth, supra].

It appears that the Court's decision to allow Celsius as a defaulting company to commence mining operations flows from the over 250 letters voicing customer concerns appearing on the Docket [In re Celsius Network LLC, U.S. Bankruptcy Court for the Southern District of New York, No. 22-10964]. These concerns are summarized in the chart that follows:


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"Currently, the crypto lending firm is looking into more significant sales of some or all of its assets while in bankruptcy. Reports suggest it would return to court on September 1st to obtain approval for a process and schedule for auctioning its assets" [Deka, supra].

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