Celsius (CEL-USD) is throwing a Hail Mary in its quest to reverse its bankruptcy. And in today’s Celsius crypto news, the company is seeing some support from the court. A judge is giving it the green light to start crypto mining its way out of debt. The news comes just after some turmoil inflicted by creditors seeking to bar this possibility.
The company’s woes stem back to the crypto crash back in May. Terra Classic’s (LUNC-USD) demise meant more than just the end of that crypto ecosystem as we knew it; it brought the entire market down. Several crypto investing companies, like Celsius, were massively exposed to Terra. Celsius had taken out far over-leveraged loans to maximize its staking potential, including a sizable exposure to Terra.
When crypto prices plummeted, Celsius began missing its many margin calls from lenders. Fast forward just a few days, and the company is finding itself in a deep pit of debt — to the tune of $1.2 billion, in fact. After a controversial decision to freeze vast amounts of user funds, the company finds itself in its current situation.
While Celsius attempted in vain to pay off hundreds of millions of dollars in debt to DeFi platforms, it now finds itself in the midst of bankruptcy proceedings. The company has filed for Chapter 11 bankruptcy protections.
Unlike Chapter 7 bankruptcy, Chapter 11 doesn’t require the immediate liquidation of assets. Rather, it gives a company a chance to right its sinking ship, paying off debts to shareholders and resuming operations as normal once again. Celsius has made known its plans to execute this debt repayment, and though it has been receiving pushback against this plan, it is getting the go-ahead today.
Celsius Crypto News: Judge Approves Crypto Mining Strategy
Just days after declaring for bankruptcy, Celsius unveiled a slightly controversial plan to get itself out of debt. Creditors have been pushing back against this plan. However, Celsius crypto news today sees the company winning the approval of the court.
In the aftermath of its bankruptcy filing, Celsius executives made the promise they wouldn’t be going away. Rather, the company unveiled an ambitious plan to mine its way out of debt. Its sibling company, Celsius Mining, would provide the company the means to pay off its debts, according to these claims.
This plan was controversial for a number of reasons. First of all, it would require more investment from the company — about $5 million — to kick off the operation. Second, the company is in a $1.2 billion hole related to its Bitcoin (BTC-USD) liabilities.
According to the company, Celsius Mining is capable of mining about 14 BTC per day. At this rate, it would take the company several years to acquire enough Bitcoin to cover its debt. Thus, it is unsurprising that creditors moved to block approval for this plan. However, the tides are turning in Celsius’s favor.
After it came to light that Celsius would completely run out of money by October at current rates, the judge presiding over the company’s bankruptcy proceedings is approving the company’s crypto mining plan. Celsius remains confident this operation will turn profits for the company and help it crawl its way out of debt. As it stands, the judge says the company is only permitted to sell the Bitcoin it mines. This is to prevent it from selling equity and debt investments in other companies.
On the date of publication, Brenden Rearick did not have (either directly or indirectly) any positions in the securities mentioned in this article. The opinions expressed in this article are those of the writer, subject to the InvestorPlace.com Publishing Guidelines.