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Celsius Network Announces Unstaking of Ethereum Holdings to Facilitate Distribution to Creditors

Ruholamin Haqshanas
Last updated: | 2 min read
Source: Adobe/Canva

Now-defunct cryptocurrency lender Celsius Network has revealed plans to unstake its Ethereum (ETH) holdings as part of its efforts to distribute assets to creditors. 

In a recent announcement made on X, Celsius Network shared that it intends to carry out a “significant” unstaking event within the next few days.

“Celsius will unstake existing ETH holdings, which have provided valuable staking rewards income to the estate, to offset certain costs incurred throughout the restructuring process,” the company wrote. 

Back in July 2022, Celsius Network faced a liquidity crisis due to the downturn in the crypto market, leading to a freeze on withdrawals. 

As a result, the company filed for Chapter 11 bankruptcy protection in the U.S. Bankruptcy Court for the Southern District of New York.

Since then, Celsius has been working towards a settlement plan that allows qualified users to withdraw 72.5% of their crypto holdings until February 28. 

Court documents from September revealed that approximately 58,300 users held a total of $210 million in what the court classified as “custody assets.”

Meanwhile, Alex Mashinsky, the founder and former CEO of Celsius Network, who is currently out on bail after being arrested on fraud charges, is scheduled to face a jury trial on September 17.

Celsius Shifts Focus to Crypto Mining

Last month, Judge Martin Glenn granted Celsius the permission to proceed with a second alternative previously approved by Celsius’ creditors, which involves the creation of a public company dedicated solely to Bitcoin mining.

According to the new arrangement, creditors will receive a portion of their recovery through shares in the upcoming Bitcoin mining company, which allows the creditors to benefit from the success and growth of the mining operations.

Furthermore, this plan unlocks $225 million in crypto assets that were initially intended to finance new ventures, but were rejected by the Securities and Exchange Commission (SEC).

The newly formed entity, known as MiningCo, will be operated by Hut 8 under a four-year mining management contract. 

This agreement entails the supervision of five mining locations in Texas, which collectively possess a computing capacity of approximately 12 EH/s (equivalent to 122,000 miners) and over 300 MW of power.

In a court filing made in November, Celsius outlined its intentions to relaunch under a temporary name, “NewCo,” until a permanent name is chosen. 

The revitalized enterprise will focus on staking and mining activities, boasting a projected balance sheet of $1.25 billion, with $450 million in liquid cryptocurrency, as stated in court documents. 

The company foresees generating annual earnings of “$10 to $20 million” through staking crypto on the Ethereum network.