According to reports, Core Scientific has submitted a petition for protection under Chapter 11 of the U.S. bankruptcy code in the state of Texas due to declining revenues and prices of bitcoin.Only a few days after creditors attempted to help Core Scientific, a Bitcoin mining company, escape probable bankruptcy, news emerged confirming the company’s impending demise.To preserve the value for the company’s stakeholders, the financial services platform B. Riley made an offer to finance Core Scientific in the amount of $72 million on December 14; of this amount, $42 million would be provided with no conditions attached, and the remaining $32 million would be subject to certain requirements.The decision was reached after the valuation of Core dropped from $4.3 billion in July 2021 to $78 million at the time the report was made.Core Scientific was forced to liquidate 9,618 Bitcoin in April in order to continue business as usual. This was a direct consequence of a protracted bear market.The Bitcoin mining firm will reportedly file for Chapter 11 bankruptcy on December 21, 2022, based on a report by CNBC, which cited a person familiar with the company’s finances as its source.Even while the firm is still producing positive cashflows, the money is not sufficient to cover the operational expenditures, which include paying back the lease for the Bitcoin mining equipment.As stated in the article, Core Scientific does not appear to have any intention of winding down its mining activities and will apparently carry them out as usual.During the time that creditors were willing to extend a helping hand, the company’s shares saw a momentary increase of about 200%, which has since been followed by a consistent decrease.The United States Securities and Exchange Commission received a filing from Core Scientific on October 26 that suggested the company was in a precarious financial position.According to the firm, the key causes for this predicament were low Bitcoin prices, rising power expenses, a rise in the worldwide Bitcoin hash rate, and a bankruptcy filing by crypto lender Celsius that wiped off the obligations owing to Core Scientific.As an effort to improve the reliability of its cloud services, the multinational technology company Microsoft recently implemented a restriction that prevented its cloud customers from mining cryptocurrency.
Tag: chapter 11
Mark Cuban To Testify On Voyager Marketing
Next month, the owner of the Dallas Mavericks, Mark Cuban, is scheduled to give a deposition as part of the defense against a potential class-action lawsuit alleging that he promoted a Ponzi scheme in the form of the now-defunct cryptocurrency lender Voyager Digital. The lawsuit alleges that Cuban was aware of the Ponzi scheme and failed to stop it.
U.S. Magistrate Judge Lisette M. Reid issued an order on January 9 denying Cuban’s motion to break the deposition into two sessions. Instead, the judge ruled that Cuban’s complete deposition would be conducted on February 2 in Dallas, Texas. Cuban appealed this decision, but the request was refused.
Before February 23, two workers of the Dallas Mavericks will testify in a deposition that is being taken as part of the defense.
In addition, the court ruled that the case’s three plaintiffs, Pierce Robertson, Rachel Gold, and Sanford Gold, would each give a deposition prior to the end of this month.
The attorneys for the plaintiffs expressed their delight on January 9 in an interview with the newspaper Law360, which covers legal news, that the court had rejected Mark Cuban’s requests to suspend and postpone the discovery process.
A representative for Cuban’s legal team also talked with Law360 and said that the deposition of the plaintiffs would address questions about standing, claimed false claims that were included in the lawsuit, and inquiries regarding the Voyager accounts that were owned by the plaintiffs.
The contested complaint was first filed on August 10 of this year. The plaintiffs argue that Cuban misrepresented Voyager on many times before it went bankrupt, including false claims that it was cheaper than its rivals and that it offered trading services “commission-free.”
In addition to this, the lawsuit asserts that the company sold unregistered securities and that Cuban and Stephen Ehrlich, the CEO of Voyager, used their expert knowledge to persuade uneducated investors to invest their life savings in what they now believe to be a Ponzi scheme. Cuban is also named in the lawsuit.
On July 6, Voyager filed its bankruptcy petition under Chapter 11 after struggling with cash challenges brought on by the crypto winter and a significant debt to Three Arrows Capital that was defaulted on by the latter. The reorganization of the company was underlined as the reason for the transfer by the company.
DOJ Appeals Against Approval of Voyager-Binance.US Asset Sale
The ongoing legal battle between Voyager Digital and U.S. regulators has taken another turn. The U.S. Department of Justice (DOJ) has filed an appeal against the latest decision in the case, which pertains to the sale of assets between Voyager Digital and Binance.US.
On March 8, the U.S. Trustee for Region 2 made the appeal to the U.S. District Court for the Southern District of New York against the approval of Voyager Digital’s Chapter 11 bankruptcy plan. The plan was confirmed only a day prior by U.S. bankruptcy judge Michael Wiles, despite objections from the SEC and other regulators.
The Chapter 11 plan would have allowed Voyager Digital to sell billions of dollars in assets to Binance.US in an effort to regain liquidity to pay back customers. In court filings, Voyager claimed that this deal would allow the company to recover an estimated 73% of customer funds.
However, the SEC and other regulators have been outspokenly against this deal, citing concerns over securities law. In a court filing from Feb. 24, the Texas State Securities Board and the Department of Banking objected to the deal with Binance.US.
Despite these objections, Judge Wiles approved the Chapter 11 plan, stating that he could not put the case into an “indeterminate deep freeze while regulators figure out whether they believe there are problems with the transaction and plan.“ He also noted that 97% of Voyager customers favored the Binance.US deal, according to a poll released in a court filing on Feb. 28.
If U.S. regulators successfully block this deal, Voyager may have to liquidate. The initial bankruptcy was filed on July 5, 2022, as the brokers attempted to restructure and “return value” to more than 100,000 customers.
This legal battle highlights the challenges that cryptocurrency companies face in navigating the regulatory landscape. While the industry is still largely unregulated, U.S. authorities have begun to take a more aggressive stance in recent years. As a result, many companies are struggling to comply with existing regulations and stay on the right side of the law.
For Voyager Digital, the outcome of this legal battle will have significant implications. If the Chapter 11 plan is ultimately approved, the company will be able to sell assets to Binance.US and recover a significant portion of customer funds. However, if regulators block the deal, the company may be forced to liquidate, leaving customers without recourse.
In the meantime, the case serves as a reminder of the importance of regulatory compliance in the cryptocurrency industry. As authorities continue to crack down on illicit activities and push for greater transparency, companies that fail to comply may face severe consequences.
Crypto Lender Celsius to Proceed with Chapter 11 Restructuring Plan
In a bid to restructure and move forward with its operations, Celsius Network has announced that it will proceed with its Chapter 11 plan. The plan is designed to provide the crypto lender with a path to financial stability after facing bankruptcy. Celsius has stated that it will file a disclosure statement on April 12, containing information that will be used by claim holders to vote on the proposed restructuring plan.
The Chapter 11 restructuring plan is aimed at ensuring that the crypto lender can operate in a financially sustainable manner while also addressing the concerns of its creditors. NovaWulf, a company that invests in distressed assets, has sponsored the proposed restructuring plan.
According to a court filing made on March 31 in the United States Bankruptcy Court for the Southern District of New York, the disclosure statement aims to provide “adequate information” to claim holders to allow them to vote on the proposed restructuring plan. The statement is expected to contain a detailed analysis of Celsius Network’s operations, finances, and proposed plan for restructuring.
Celsius Network’s bankruptcy has been a significant event in the crypto world, as it was one of the first major crypto lenders to face financial difficulties. The company had attracted significant attention in the crypto community due to its high interest rates on deposits and loans. However, the bankruptcy has raised concerns about the sustainability of the business model and the risks involved in crypto lending.
The Chapter 11 restructuring plan represents a significant step forward for Celsius Network and the crypto lending industry as a whole. If successful, the plan could provide a roadmap for other struggling crypto lenders to follow. However, the success of the plan is far from guaranteed, and there are still significant risks involved in the crypto lending space.
As this is a developing story, more information about Celsius Network’s restructuring plan and its impact on the crypto lending industry is expected to emerge in the coming days and weeks.
Celsius Network Announces Disclosure Statement for Chapter 11 Plan
In a court filing on March 31, Celsius Network revealed that it plans to file a disclosure statement on April 12, containing details about the events that led to its bankruptcy, projected recoveries for certain stakeholders, and answers to frequently asked questions. This is part of its Chapter 11 restructuring plan, which was proposed in February and aims to create a public platform called NewCo that is fully owned by Earn creditors. The restructuring plan is sponsored by NovaWulf, and the committee of unsecured creditors will appoint the majority of the firm’s board members, with no involvement from Celsius founder.
The bankruptcy court is expected to hold a hearing regarding approval of the disclosure statement on May 17, with a vote on the plan to follow. If approved, the restructuring plan would allow Earn creditors to take full ownership of NewCo and appoint a majority of the board members. This would result in no involvement or relationship with the Celsius founder.
Since filing for Chapter 11 in July 2022, Celsius Network’s bankruptcy proceedings in court have included discussions on assets from the firm’s Earn program, crypto holdings, Bitmain coupons, and personal information of its users. In March, the bankruptcy judge approved a settlement plan allowing Celsius custody account holders to receive back 72.5% of their crypto.
Celsius Network was founded in 2017 as a peer-to-peer lending platform for cryptocurrency. The company’s main product, the Earn program, allows users to earn interest on their cryptocurrency holdings. The platform has gained popularity in recent years, with over 1 million users and more than $25 billion in assets under management.
The company filed for Chapter 11 bankruptcy in July 2022, citing liquidity issues and regulatory pressures. Since then, the company has been working on a restructuring plan to address its financial difficulties and ensure the protection of its users’ assets.
The proposed restructuring plan, sponsored by NovaWulf, aims to create a public platform called NewCo that is fully owned by Earn creditors. This would allow users to have more control over the platform and its operations, with no involvement or relationship with the Celsius founder.
The upcoming disclosure statement, to be filed on April 12, will provide claim holders with more information about the restructuring plan and its potential impact on their assets. The statement will also provide answers to frequently asked questions and include details of events leading up to Celsius’ bankruptcy.
The bankruptcy court is expected to conduct a hearing regarding approval of the disclosure statement on May 17, with a vote on the plan to follow. If the plan is approved, it could be a positive step for Celsius Network and its users, providing a path forward for the company to address its financial difficulties and regain stability.
Celsius Network to File Disclosure Statement for Restructuring Plan
Bankrupt crypto lender Celsius Network has announced it will be moving forward on its Chapter 11 restructuring plan with a disclosure statement containing information for claim holders. The statement is set to be filed on April 12, providing adequate information for claim holders to vote on the proposed restructuring plan sponsored by NovaWulf.
Celsius first presented the plan in February, which proposed creating a public platform fully owned by Earn creditors called NewCo. The committee of unsecured creditors will appoint the majority of the firm’s board members, with no Celsius founder involvement or relationship. The goal of this plan is to ensure a fair restructuring process that prioritizes the interests of creditors and other stakeholders.
The debtors’ statement regarding the plan reveals that the April 12 filing will include details of events leading up to Celsius’ bankruptcy, projected recoveries for certain stakeholders should the restructuring plan be approved, and answers to frequently asked questions. The bankruptcy court is expected to conduct a hearing regarding approval of the disclosure statement on May 17, with a vote on the plan to follow.
Since filing for Chapter 11 in July 2022, Celsius’ bankruptcy proceedings in court have included discussions on assets from the firm’s Earn program, crypto holdings, Bitmain coupons, and personal information of its users. In March, the bankruptcy judge approved a settlement plan allowing Celsius custody account holders to get back 72.5% of their crypto.
Celsius Network is a crypto lending platform that enables users to earn interest on their crypto assets or borrow funds against them. The company was founded in 2017 by Alex Mashinsky, an entrepreneur and inventor known for his contributions to the Voice Over Internet Protocol (VoIP) industry. Celsius gained popularity among crypto investors due to its high interest rates and low fees.
However, the company faced financial difficulties in 2021 as the crypto market experienced a sharp downturn. In July 2022, Celsius filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York. The company cited a range of factors, including market volatility, regulatory scrutiny, and liquidity issues.
As part of its bankruptcy proceedings, Celsius has been exploring various restructuring options to address its financial challenges. The proposed plan sponsored by NovaWulf is one such option that seeks to create a fair and transparent process for creditors and other stakeholders.
In summary, the disclosure statement that Celsius Network plans to file on April 12 is a significant step forward in its Chapter 11 bankruptcy proceedings. The statement will provide claim holders with vital information about the proposed restructuring plan, including projected recoveries and details of the events leading up to Celsius’ bankruptcy. The restructuring plan, which aims to create a public platform fully owned by Earn creditors, is a key part of Celsius’ efforts to emerge from bankruptcy and restore its financial health.
BlockFi Granted Extension to Submit Bankruptcy Exit Plan
BlockFi, a leading lender of digital assets, filed for bankruptcy in November 2022, and has been granted an extension until May 15 to submit an exit plan, according to a New Jersey bankruptcy judge. The crypto firm is exploring a potential sale of company assets or the possibility of getting an outside backer to support a restructuring deal, as per the company’s lawyer Joshua Sussberg.
The bankruptcy code requires debtors to propose a Chapter 11 plan within the first 120 days of filing, which meant that BlockFi was required to present a plan by March 27. However, on March 21, the company filed a request to prolong the deadline for its Chapter 11 plan by 90 days to June 26. The company’s lawyers argued that “much work remains” due to the scale and complexity of the Chapter 11 cases. Judge Michael Kaplan, the bankruptcy judge handling the case, deemed it worthwhile to extend the deadline to ensure the smooth continuation of the case, albeit a shorter extension than the one requested by BlockFi.
The company is estimated to owe up to $10 billion to over 100,000 creditors. A committee of BlockFi customers argued they should be allowed to take control of the bankruptcy case so that cryptocurrency held on the platform can be returned to creditors immediately. Committee lawyer Robert Stark told Kaplan that BlockFi creditors aren’t sophisticated lenders, but individual mom-and-pop retail customers, “many of whom have lost their life savings.” The committee cited the lack of a workable business for reorganization and the potential sale of the platform, which Stark referred to as a “bundle of sticks.”
Although Kaplan rejected the committee’s appeal, he granted an extension that was “modest” according to Sussberg, who stated that the company would have a plan ready for unsecured creditors to evaluate within two weeks. The crypto firm’s lawyers have indicated that they are exploring all possible avenues, including a sale of assets, to emerge from bankruptcy as a more robust entity.
BlockFi’s financial woes stem from the company’s controversial decision to offer high-yield accounts backed by cryptocurrencies like Bitcoin and Ethereum. However, the firm’s aggressive growth strategy was met with regulatory scrutiny, with several states such as New Jersey, Alabama, and Texas ordering the company to cease operations in their jurisdictions.
In January 2022, the US Securities and Exchange Commission (SEC) issued a cease-and-desist order against BlockFi, alleging that the firm’s interest accounts were unregistered securities. The SEC’s lawsuit is ongoing, with BlockFi seeking to have the case dismissed.
In conclusion, the extension granted to BlockFi provides the company with additional time to devise a plan to emerge from bankruptcy as a viable entity. However, the company faces several challenges, including regulatory scrutiny, legal battles, and the loss of customer confidence. Only time will tell whether BlockFi can overcome these hurdles and regain its position as a leading player in the cryptocurrency lending space.
SEC Raises Objections to Celsius Network's Restructuring Plan Involving Coinbase
Key Takeaways
SEC files limited objection against Celsius Network’s restructuring plan.
Concerns raised over the company’s proposed engagement with Coinbase.
SEC’s ongoing lawsuit against Coinbase cited as complicating factor.
Next bankruptcy court hearing scheduled for October 5, 2023.
Background and Timeline
Celsius Network filed for Chapter 11 bankruptcy after announcing a $14 million agreement with Core Scientific, a mining company. Since filing for bankruptcy in July 2022, Celsius has reportedly failed to meet its payment obligations to Core Scientific. The restructuring plan has undergone several amendments since its initial filing in March 2023, with the fourth iteration submitted in August 2023. The bankruptcy court has yet to approve the plan, and the next hearing is scheduled for October 5, 2023.
SEC’s Concerns
The SEC’s limited objection focuses on Celsius Network’s proposed engagement with Coinbase, which is intended to act as a Distribution Agent for international customers under the restructuring plan. The SEC argues that the role of Coinbase in the arrangement “goes far beyond the services of a distribution agent,” potentially implicating brokerage and master trading services. These services are central to the SEC’s ongoing lawsuit against Coinbase, initiated in June 2023. The SEC has reserved the right to object further based on the outcome of this and other related cases.
Coinbase’s Response
Coinbase CEO Brian Armstrong and Chief Legal Officer Paul Grewal took to social media to express their support for Celsius Network. They questioned why the SEC would object to a “trusted US public company” taking on the role of distributing assets back to Celsius customers. The statement raises questions about the SEC’s motives and adds another dimension to the ongoing legal complexities.
Implications and Next Steps
The SEC’s objection could potentially delay or alter the terms of Celsius Network’s restructuring plan. It also raises questions about the regulatory landscape for crypto companies engaging with traditional financial institutions. The bankruptcy proceeding is set to continue, with the next hearing scheduled for October 5, 2023. The SEC reserves the right to object further based on the outcome of this and other related cases.
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FTX Announces Proposed Settlement and Amended Plan in Chapter 11 Cases
On October 17, 2023, FTX Debtors made a significant announcement regarding their ongoing Chapter 11 cases, marking a major milestone in their efforts to resolve complex customer property disputes. After extensive discussions involving key stakeholders, including the Ad Hoc Committee of Non-US Customers, the Unsecured Creditors Committee, and class action plaintiffs, FTX Debtors have reached a proposed settlement.
If approved by the Bankruptcy Court, this settlement will result in the creation of a special “Shortfall Claim” designed to benefit customers. This concept was initially proposed by FTX Debtors in July. The primary goal is to facilitate an offer to eligible customers, allowing them to settle their customer preference exposure at an agreed-upon amount. All creditor representatives involved in the negotiations have agreed to support a related amended Plan of Reorganization, which is expected to be filed by December 16, 2023.
In a related development, the Official Committee of Unsecured Creditors of FTX expressed its support for the proposed settlement and the amended Plan Term Sheet. The Plan Term Sheet represents a compromise between various parties, including the Committee, the Debtors, the ad hoc customer committee, and other representatives. It addresses a range of issues that aim to balance the rights of customer and non-customer creditors across the U.S. and foreign debtors.
The Committee believes that the amended Plan Term Sheet will expedite the Chapter 11 cases and the timeline for creditor and customer recoveries, although they acknowledge that significant work remains to be done. They remain committed to safeguarding the interests of customers and creditors throughout this process.
FTX Debtors, in their official announcement on October 16, 2023, detailed their proposed settlement and amended Plan of Reorganization. The settlement, known as the “Customer Shortfall Settlement,” is expected to resolve customer property disputes and pave the way for the Amended Plan, to be filed by December 16, 2023. If approved, this settlement will bring resolution to the customer property litigation filed against FTX Debtors and expedite the confirmation of the Amended Plan in the second quarter of 2024.
The Customer Shortfall Settlement addresses the assertion that customers of FTX.com and FTX US have property interests in certain assets, rather than an unsecured claim. It provides customers with an unsecured claim that has an equitable priority to certain segregated property.
The Amended Plan divides FTX Debtors’ assets into three pools and provides Shortfall Claims for customers of FTX.com and FTX US. Customers are estimated to receive over 90% of distributable value worldwide if the Amended Plan is approved. However, it’s important to note that full payment may not be guaranteed for all customers.
The proposed settlement also includes an opportunity for eligible customers to resolve preference exposure related to their claims. The FTX Debtors will offer eligible customers the option to reduce their claim by an amount specified in the Amended Plan ballot. This preference settlement offer is subject to approval by the Bankruptcy Court.
Customers and creditors can access additional information related to the court proceedings and the proposed settlement on the U.S. Bankruptcy Court’s website.
Core Scientific's Bankruptcy Exit: Financial Revival and Operational Expansion
Core Scientific, a significant Bitcoin miner, has provided a comprehensive description of its bankruptcy plan, which has been approved by the court and will enable the firm to emerge from Chapter 11 bankruptcy. The proposal for the reorganization, which is scheduled to go into effect on January 5, 2024, entails considerable changes to both the financial environment and the operational environment.
Through the implementation of the plan, Core Scientific will emerge from the bankruptcy process with a net debt of $709 million and an equity value of $791 million. Due to the fact that just $46 million of its debt is due to mature until 2025, it intends to efficiently manage its debt. The proposal calls for the issuing of new shares to be exchanged at a ratio of 25:1, which translates to $1.08 per share prior to the exchange. This deal is intended for the company’s common shareholders. For notes that are due in April, noteholders will get $1.628 for every $1 of face value, and for notes that are due in August, noteholders will receive $1.201 for every $1 of face value. These distributions are expected to take place on January 3, 2024.
Core Scientific is responsible for the operation of seven plants that are spread out over five states in the United States and have a combined capacity of 724 megawatts (MW). It is anticipated that the firm would increase its income from $583 million in 2024 to $968 million in 2027 as a result of its intentions to increase its capacity by an additional 372 megawatts by the end of the fiscal year 2027. The failure of the company to accept a rescue offer from the B. Riley financial services platform was one of the factors that contributed to the impending bankruptcy of the company. Other factors included poor revenue and falling Bitcoin values.
Core Scientific is going to re-list its shares on Nasdaq during this restructuring, which will allow the company to retain around sixty percent of its stockholders. This is a big reversal for the company. Adam Sullivan, the Chief Executive Officer of the firm, has stated his confidence about the future. He has cited the increasing demand for Bitcoin and high-value compute as major drivers for the creation of shareholder value and the achievement of operational efficiency at full scale.