Celsius, a crypto lending company, swiftly executed a transfer of over $10 million worth of Ethereum to an exchange on Wednesday. This move occurred just six days after a judge granted approval for the firm’s bankruptcy plan.
Based on on-chain data monitored by Lookonchain, Celsius initiated the transfer of 5,160 ETH, valued at approximately $10.49 million, to the institutional trading platform FalconX. The company, currently undergoing a transition to a new model under creditor ownership, is navigating its operations within the context of the approved bankruptcy plan.
Celsius Enters New Chapter Post-Bankruptcy
Celsius filed for bankruptcy in July 2022 during a broader downturn in the cryptocurrency market. The recently approved plan outlines a transformation for Celsius into a crypto mining and staking entity named NewCo, boasting an anticipated $1.25 billion balance sheet. A segment of this balance sheet will comprise liquid crypto assets available for staking, generating yields.
The Ethereum transfer hints at Celsius’s potential strategy to liquidate some holdings to secure capital during this transitional phase. With Ethereum prices having surged nearly 70% since the beginning of 2023, rebounding from the previous year’s lows, the timing allows Celsius to potentially sell ETH at favorable rates. This move aligns with the company’s efforts to optimize its financial position during its shift towards becoming NewCo.
Ethereum Sale Preps Celsius for Focus on Staking
Lookonchain reports indicate that Celsius has recently initiated transfers of various tokens to exchanges such as Binance and OKX. These tokens encompass stablecoins, governance tokens like SPELL, and utility tokens like BAT. The bankrupt company appears to be in the process of liquidating segments of its portfolio across different asset types.
The recent approval of a restructuring plan signifies a significant development in Celsius’ trajectory. This plan formally transfers ownership of Celsius to its creditors. Under the revised ownership structure, creditors are poised to benefit from the staking yields generated by the remaining crypto assets held by Celsius. Preliminary estimates suggest that the staking operation could yield between $10 to $20 million annually.
This decision comes after a period of uncertainty regarding the fate of the troubled lender. Celsius had suspended withdrawals in June 2022, attributing the action to extreme market conditions. The withdrawal freeze left numerous customers unable to access their assets on the platform.
Celsius’ bankruptcy filing, which came on the heels of owing creditors nearly $5 billion, marked a significant financial challenge for the company. The approved restructuring plan delineates the terms for creditors to recoup a portion of the outstanding funds.
As ownership transitions to creditors, Celsius is distancing itself from its previous retail lending model. The sanctioned bankruptcy plan explicitly prohibits the newly formed entity, NewCo, from “engaging in lending or rehypothecation of assets.”
In its revised role, NewCo will exclusively operate as a crypto mining and staking enterprise, leveraging protocols like Lido to generate staking yields from assets such as Ethereum. The recent liquidation of ETH holdings aligns with this strategic shift.
The year-long saga surrounding Celsius underscores the risks associated with crypto lending platforms. While appealing yields attracted customers, overly speculative practices jeopardized customer deposits during market downturns. With new management at the helm, Celsius aims to navigate a more sustainable path forward.