After the precipitous fall of crypto hedge fund Celsius, U.S. bankruptcy courts are allowing the embattled lender to pay a significant amount of its debt through its mining rigs. As of the time of writing, Celsius owns more than 43,623 mining rigs that are able to mine and successfully produce $339,119 per day.
With this significant cash flow, Celsius might just have a chance at paying back the thousands of disenfranchised retail investors that were left with virtually nothing after the hedge fund paused all withdrawals in early July.
The Fall of a Titan
Celsius was once known as one of the best hedge funds to invest your money in with returns as high as 30% in some cases. Since those glory days, Celsius has fallen into an apparent default on its loans, with liabilities in the excess of $5 billion with $4.5 billion of those owed to investors.
Now the fallen hedge fund is attempting to turn its luck around in the form of its mining rigs. Celsius now claims it can produce enough cash flow to begin the process of paying down its debt and debtors.
Most are retail investors, who poured their savings into the crypto hedge fund, hoping to create a life of abundance, yet clearly, that failed precipitously. Will Celsius be able to pay everyone back?
The Justice Department Weighs In
A U.S. Department of Justice official wants to appoint an independent examiner to get to the bottom of why the crypto lender Celsius Network went bankrupt and whether any laws were broken on the way down. In a filing Thursday evening, representatives for U.S. Trustee William K. Harrington asked the judge overseeing Celsius’s bankruptcy to appoint an independent examiner. Such examiners have been used in the past after major bankruptcies such as those of Enron and WorldCom in the early 2000s.
Celsius didn’t respond to a request for comment (naturally). The examiners, which are often appointed in large bankruptcy cases, are meant to help protect a company’s creditors and can be empowered to request documents or other evidence from companies as they try to ascertain the circumstances that led to a company’s failure.
While the amount of debt that Celsius owes to its former customers and other creditors makes it likely that an examiner will be appointed, it will be up to the judge to decide the scope of the investigation. And only time will tell whether Celsius follows through with its plan to turn a profit from its mining rigs and actually pay back those investors that were left, quite literally, out in the cold holding an empty purse bag.
Looking Closely At Celsius
Martin Glenn will be the chief judge presiding over the Celsius case. He is the Chief Judge of the U.S. bankruptcy court for the Southern District of New York and intends on being hard and steel-footed with his handling of the crypto hedge fund.
Just in a filing in the case made earlier this week, Celsius said it owed creditors about $6.7 billion worth of cryptocurrencies or about $2.85 billion more than it had in crypto assets. In the legal filings, the U.S. Trustee’s office, which is part of the Justice Department, noted that the crypto lender had been accused by several regulators of breaking the law by offering its yield products without registering them as securities, a charge the company has denied.
The trustee noted that Celsius also has been accused in a separate lawsuit of mismanaging the risk in its portfolio. Some letters filed by very angry and rightfully-so Celsius customers in the bankruptcy court have accused the company of being a Ponzi scheme.
Will these troubles ever end for the Celsius Network? Or will they be yet another casualty of the great and long crypto winter?