Celsius Network Chapter 11: Earn Asset Ruling, MiningCo Pivot, and .35B Creditor Distributions

Celsius Network LLC and 18 affiliated debtors filed chapter 11 petitions on July 13, 2022 in the U.S. Bankruptcy Court for the Southern District of New York under lead case number 22-10964 before the Hon. Martin Glenn. The filing followed Celsius's June 12, 2022 decision to halt all withdrawals, swaps, and transfers across a platform that reported approximately 1.7 million registered users and roughly $4.31 billion in assets against $5.5 billion in liabilities at petition.

The case became the central proceeding for U.S. crypto-lender restructurings. It produced Judge Glenn's January 4, 2023 ruling that "Earn" account assets were property of the estate, a confirmed plan that pivoted twice on the way to effectiveness, and a litigation pipeline pursuing more than 2,000 preference defendants. The plan was confirmed November 9, 2023 and went effective on January 31, 2024, launching distributions of liquid cryptocurrency, cash, and shares of a newly formed Bitcoin mining company to creditors.

Debtor(s)	Celsius Network LLC (19 jointly administered entities)
Court	U.S. Bankruptcy Court, Southern District of New York
Case Number	22-10964
Petition Date	July 13, 2022
Judge	Hon. Martin Glenn
Confirmation Date	November 9, 2023
Effective Date	January 31, 2024
Claims Agent	Stretto, Inc.
DIP Facility	None; debtors operated on cash collateral / self-funded basis

From CEL Token Launch to the June 2022 Pause

Celsius Network was founded in 2017 by Alex Mashinsky, S. Daniel Leon, and Nuke Goldstein and operated a mobile and web platform allowing users to earn rewards on deposited digital assets, borrow against crypto collateral, and swap cryptocurrencies. The CEL token initial coin offering launched in March 2018 and the consumer platform went live that June. Under the Terms of Use, users transferred title to digital assets in the platform's "Earn" program in exchange for rewards denominated in either interest or CEL tokens, and Celsius deployed those assets into third-party lending, DeFi protocols, and other yield strategies, capturing the spread.

Platform assets grew from over $50 million at year-end 2018 to more than $10 billion by March 2021, per the First Day Declaration of Alex Mashinsky. In October 2021 Celsius acquired GK8 Ltd., an Israeli blockchain security and institutional custody technology company, for $115 million. In December 2021, Celsius announced the first closing of a Series B equity round at $600 million, implying an enterprise value of approximately $3 billion. By the petition date the company served roughly 1.7 million registered users in over 100 countries, with about 300,000 active users carrying balances above $100.

The mining business was significant in its own right. Celsius Mining LLC operated 80,850 rigs at filing with 43,632 in operation, generating approximately 14.2 Bitcoin per day. Celsius Network Limited had extended a $750 million intercompany revolver to Celsius Mining; about $576 million was outstanding as of May 31, 2022.

Distress crystallized in May–June 2022. The First Day Declaration attributed the filing to a combination of "poor asset deployment decisions" — illiquid long-term positions that could not be unwound quickly — and an external shock from the May 2022 implosion of the Terra LUNA ecosystem and its UST stablecoin, which triggered a sector-wide selloff and loss of confidence in crypto lenders. Negative media and social-media commentary in early June 2022 accelerated withdrawals into a bank-run dynamic that the platform could not service while simultaneously meeting collateral calls on its own borrowing positions. On June 12, 2022 — the "Pause Date" — Celsius halted all withdrawals, swaps, and transfers. The company retained Centerview Partners and Alvarez & Marsal on June 19, 2022, added Kirkland & Ellis as restructuring counsel on June 28, 2022, and filed chapter 11 thirty-one days after the Pause.

Capital Structure, the stETH Position, and the Cash Collateral Path

The Mashinsky declaration laid out a balance sheet whose liabilities were almost entirely owed to retail users. Earn program assets totaled approximately $4.2 billion across more than 600,000 users; Custody program assets totaled approximately $180 million across roughly 58,000 users. Retail loan collateral on the platform was approximately $765.5 million backing about 23,000 retail loans with $411 million in outstanding principal, while institutional loan collateral was about $98.5 million securing $93 million in performing loans across 47 borrowers. The estate held approximately $130 million in cash on hand at filing, and total assets of approximately $4.31 billion sat against approximately $5.5 billion in total liabilities, a deficit of approximately $1.19 billion.

The single most consequential illiquid position was Celsius's stake in Lido staked Ether. The platform held 410,421 stETH, valued at approximately $467 million at filing, earning roughly 5% APY but illiquid given the unstaking constraints in place at the time. The stETH position concentrated the maturity-mismatch problem: rewards continued to accrue, but the asset could not be converted into liquid Ether quickly enough to meet redemption demand once the bank run accelerated. As of June 27, 2022 — sixteen days before the petition — Celsius had $648 million in DeFi borrows collateralized by $1.61 billion in assets. By the petition date, the company had unwound nearly all of its DeFi and FTX-related loans, leaving a single residual loan of approximately $3.2 million collateralized by $6.6 million in digital assets.

Celsius did not pursue a third-party DIP loan. The court instead entered interim cash management and operational orders on July 19, 2022, allowing the debtors to fund the case from existing crypto assets and cash on hand. The court later authorized the ordinary-course sale of stablecoins to generate operating liquidity, an order subsequently amended in November 2022 to address the related ownership question affecting Earn-program assets. The lack of an external DIP was atypical for a debtor of this scale and reflected both the substantial residual cash position and the contested status of the Earn assets that would otherwise have been the natural collateral pool.

Earn Program Assets as Property of the Estate

The gating legal question in the case was whether the digital assets that users deposited into the Earn program belonged to the estates or to the individual account holders. On January 4, 2023, Judge Glenn ruled that Earn-program assets were the property of the debtors' estates, not the property of the depositors. The court read the platform's Terms of Use — specifically "Terms Version 8" — as an unambiguous clickwrap contract under which users granted Celsius "all right and title to such Eligible Digital Assets, including ownership rights" and authorized the company to "pledge, re-pledge, hypothecate, rehypothecate, sell, lend, or otherwise transfer or use" those assets at its full discretion in exchange for rewards.

The court rejected efforts to introduce extrinsic evidence — including pre-Pause statements by Mashinsky — to override the written contract, applying the parol evidence rule to a contract the court found facially unambiguous. The memorandum opinion and order classified approximately 600,000 Earn customers as general unsecured creditors with respect to those balances rather than as property owners with priority recovery rights. The practical consequence for the case architecture was that the Earn assets were available to fund a plan, but the value would be split across all unsecured constituencies rather than redelivered to the depositors who funded them.

The Custody program assets were treated separately. The plan ultimately incorporated a global Custody Settlement that resolved a parallel ownership dispute over Custody-program assets and produced more favorable treatment for Custody users than for Earn users. A Withhold Settlement resolved a related class of accounts that had been frozen in the run-up to the Pause.

Auction Process, Fahrenheit NewCo Collapse, and the MiningCo Pivot

Celsius ran a two-track competitive process. The court entered a bidding procedures order on September 1, 2022 governing the marketing of substantially all assets, and the GK8 subsidiary was carved out for a separate sale to facilitate a faster exit for that business. The GK8 entities filed their own chapter 11 petitions on December 7, 2022, and on December 13, 2022 the court entered a sale order to Galaxy Digital Trading LLC, free and clear of liens, closing the GK8 transaction.

The whole-business auction selected Fahrenheit, LLC as the successful plan-sponsor bidder in June 2023. Under the Fahrenheit construct, a "NewCo" reorganization vehicle would have combined Celsius's residual crypto-lending assets and mining operations into a public company, capitalized in part with the debtors' cryptocurrency holdings, with Fahrenheit's principals to operate the business and receive a management-services fee. The Fourth Amended Plan was filed on August 15, 2023 and the disclosure statement was approved on August 17, 2023, kicking off solicitation. The Modified Joint Plan followed on September 27, 2023.

The Fahrenheit transaction collapsed on the day of confirmation. The Form 10 registration statement that NewCo needed to become a publicly traded company required audited financial statements covering all contributed assets, but Celsius could produce audited historical financials only for the mining business. On November 9, 2023, the SEC informed the debtors that it would require full historical audited statements for every asset contributed to NewCo, an outcome the debtors and the Official Committee of Unsecured Creditors said in their joint motion seeking the MiningCo alternative was not achievable on any practicable timeline.

Under the MiningCo construct described in the joint motion, the reorganized vehicle would consist of Celsius's mining assets only, capitalized with $225 million in fiat currency rather than the $450 million in liquid cryptocurrency originally allocated to NewCo. The structural shift freed approximately $225 million of additional liquid cryptocurrency for immediate creditor distribution. The motion projected total liquid cryptocurrency distributions of approximately $2.6 billion under the MiningCo Transaction versus approximately $2.03 billion under the original Fahrenheit NewCo construct — a difference of roughly $570 million in distributable liquid value.

US Bitcoin Corp. was selected as the mining manager and plan sponsor. Management-services fees to US Bitcoin were set at approximately $20.4 million per year compared to approximately $35 million under the Fahrenheit construct. The MiningCo board was structured around eight directors — three appointed by US Bitcoin, four by the Committee, and one by the Committee with US Bitcoin's consent. The MiningCo perimeter included Celsius's mining operations and the mining-related receivables that did not raise regulatory complications, including loans extended to Core Scientific, Mawson, Rhodium, and Luxor Technology. The reorganized entity was registered as a public company via Form 10 filing under the brand Ionic Digital, Inc., with Hut 8 contracted to operate the mining sites under a four-year managed-services agreement covering facilities in Texas and New York.

CEL Token Settlement and Cramdown Confirmation

The plan was confirmed on November 9, 2023 over the rejection of Class 8 (Unsecured Loan Claims) and the rejection of Class 9 (General Unsecured Claims) for two debtor sub-estates — Celsius Mining LLC and Celsius Network Inc. — under the cramdown provisions of section 1129(b). Creditor support was overwhelming in absolute terms: 98.71% of voting creditors by number and 95.93% by amount supported the plan. The court contemporaneously denied a Chapter 7 conversion motion that had been filed by creditor Dimitry Kirsanov, leaving the chapter 11 plan as the operative exit.

The plan substantively consolidated Celsius Network Limited, Celsius Network LLC, Celsius Lending LLC, and Celsius Networks Lending LLC and effectuated a series of global settlements alongside confirmation: the Account Holder Avoidance Action Settlement, the CEL Token Settlement, the Class Claim Settlement, the Custody Settlement, the Retail Borrower Settlement, the Series B Settlement, and the Withhold Settlement. Each settlement resolved a discrete category of intra-case dispute: avoidance recoveries against account holders, the valuation of CEL holdings, putative class actions, ownership of Custody assets, treatment of retail borrower deposits, treatment of Series B preferred equity, and treatment of Withhold accounts.

The CEL Token Settlement was the most contested of the global settlements. In a memorandum opinion approving the settlement, Judge Glenn approved a $0.25 per-token valuation for CEL, citing concerns about market manipulation in the prepetition trading of the token and the subordination risk that would have attached if CEL were treated as an unregistered security. The petition-date market price was approximately $0.81 per token; the court found that the market price was not a reliable indicator of intrinsic value given the prepetition concerns. Under the settlement, CEL Token Deposit Claims received the $0.25/token treatment within the Earn or Custody program in which the tokens were held. All claims on the schedule of "Equitably Subordinated Claims" were subordinated without distribution, and other CEL Token Claims were classified as section 510(b) claims with no distribution.

Class	Designation	Status	Vote
1	Other Secured Claims	Unimpaired	Presumed to accept
2	Retail Borrower Deposit Claims	Impaired	Voted to accept
3	Other Priority Claims	Unimpaired	Presumed to accept
4	Convenience Claims	Impaired	Voted to accept
5	General Earn Claims	Impaired	Voted to accept
6A	General Custody Claims	Impaired	Voted to accept
6B	Withdrawable Custody Claims	Unimpaired	Presumed to accept
7	Withhold Claims	Impaired	Voted to accept
8	Unsecured Loan Claims	Impaired	Voted to reject
9	General Unsecured Claims	Impaired	Mixed (rejected for Mining LLC and Network Inc.)
10	State Regulatory Claims	Impaired	Voted to accept
11	De Minimis Claims	Impaired	Deemed to reject (no distribution)
14	Series B Preferred Interests	Impaired	Voted to accept
15	Other Interests	Impaired	Deemed to reject (no distribution)
16	Section 510(b) Claims	Impaired	Deemed to reject (no distribution)
17	Equitably Subordinated Claims	Impaired	Deemed to reject (no distribution)

Effective Date Distributions and Ionic Digital

The Modified Plan conformed for the MiningCo Transaction was filed on January 29, 2024 and the effective date occurred on January 31, 2024. Liquid cryptocurrency distributions to Earn, Custody, and other claim holders commenced on or around the effective date, and MiningCo Common Stock distributions to creditors entitled to equity in Ionic Digital began on February 1, 2024 through Odyssey Transfer and Trust Company. The Celsius mobile and web applications were shut down at the end of February 2024, eighteen months after the Pause.

The post-effective date estate has continued to make periodic distributions as litigation recoveries and reserve adjustments allow. Per the Q4 2025 post-confirmation report, cumulative distributions to creditors from the effective date through December 31, 2025 totaled approximately $4.35 billion, comprising approximately $3.13 billion in cash disbursements, approximately $658.8 million in MiningCo Common Stock at a $20-per-share reference price, and approximately $560.6 million in Bitcoin and Ethereum non-cash distributions. A second supplemental distribution of approximately $127 million was made in late 2024, and a Fourth Distribution of approximately $344.4 million commenced in February 2026.

Litigation Administrator: Preferences and the Mashinsky Track

The plan vested a Litigation Administrator with responsibility for prosecuting the estate's avoidance and other recovery actions. The administrator has filed more than 2,000 adversary proceedings targeting account holders who withdrew cryptocurrency from the platform during the 90-day preference period preceding the petition. Celsius is seeking the return of more than $2 billion in such withdrawals from large customers.

The administrator secured material rulings in 2024 and 2025. The bankruptcy court authorized service of summons and complaints via airdropped NFTs to anonymous wallet owners, an alternative-service mechanism keyed to the technology of the underlying transactions. The court subsequently held that it had personal jurisdiction over foreign customers in preference avoidance suits, with White & Case obtaining a sweeping victory on the jurisdictional question for the litigation administrator and Bloomberg Law reporting that international customers who withdrew over $100,000 ahead of the collapse remained subject to U.S. clawback litigation. In April 2025, the administrator reached a mass-settlement framework covering more than 750 defendants.

The estate has also pursued tort and contract recoveries against counterparties. A negligence suit against Cloudflare over a $50 million asset loss tied to a cybersecurity vulnerability survived a motion to dismiss in May 2025. In March 2026, the estate filed a discovery motion against Fireblocks tied to allegations of cybersecurity negligence in the prepetition custody of digital assets. Tether is a defendant in a parallel adversary proceeding, with the bankruptcy court partially denying a motion to dismiss in June 2025.

The criminal track ran in parallel to the bankruptcy. Former CEO Alex Mashinsky pleaded guilty in December 2024 to commodities fraud and securities-fraud-related charges in the Southern District of New York and was sentenced to 12 years in May 2025 for fraud and market manipulation. The criminal proceedings are independent of the bankruptcy, but the Litigation Administrator has conducted depositions of Mashinsky and co-defendant Roni Cohen-Pavon in connection with Phase Two adversary discovery.

Professional Retentions and the $124 Million Fee Slate

Total approved professional fees in the case exceeded $124 million before fee examiner adjustments and post-effective costs, per the Final Fee Order entered October 25, 2024 and supplemental orders. Centerview Partners, the debtors' investment banker, received the largest single allocation at approximately $20.1 million in approved fees and expenses. Kirkland & Ellis (including its international affiliates) was awarded approximately $15.7 million as lead debtor counsel; Akin Gump Strauss Hauer & Feld received approximately $15.5 million as special counsel; Latham & Watkins was awarded approximately $12.3 million as additional debtor legal counsel.

White & Case received approximately $12.3 million as counsel to the Official Committee of Unsecured Creditors, and Perella Weinberg Partners received approximately $6.3 million as the Committee's investment banker. Alvarez & Marsal received approximately $7.1 million as the debtors' financial advisor; Ernst & Young received approximately $5.5 million as accountants; and Elementus, Inc. received approximately $5.2 million for blockchain analytics. Christopher S. Sontchi served as fee examiner under the Fee Examiner Final Order with approximately $0.24 million in approved fees, and Godfrey & Kahn served as fee examiner counsel with approximately $2.3 million approved.

The court denied a $1.66 million contingency fee request submitted by the Sarachek Law Firm in connection with its work for the Ad Hoc Committee of Corporate Creditors, finding the requested fee did not satisfy the substantial-contribution standard. Stretto, Inc. was approved at approximately $0.07 million as claims and noticing agent. Stretto separately disclosed a phishing incident affecting Celsius creditor data in 2024, which drew judicial criticism for delays in notification.

Key Timeline

The chronology below is reconstructed from the First Day Declaration of Alex Mashinsky, the Earn-property memorandum opinion, and the Confirmation Order.

Frequently Asked Questions

Who is the claims agent for Celsius Network?

Stretto, Inc. serves as the claims and noticing agent. The firm maintains the official claims register and distributes case notifications to creditors and parties in interest.

Did Earn account holders own their crypto deposits?

No. On January 4, 2023, Judge Martin Glenn ruled that assets deposited into the Earn program were property of the debtors' estates under Celsius's Terms of Use, classifying Earn account holders as general unsecured creditors rather than as property owners with priority recovery rights. Custody program assets were addressed separately and received more favorable treatment under a global Custody Settlement.

Why did the Fahrenheit NewCo transaction collapse?

The Form 10 registration that NewCo required to operate as a public company would have required audited historical financial statements for all assets contributed to NewCo. On November 9, 2023, the SEC informed the debtors it would require full historical audited statements for every contributed asset. Celsius had audited financials only for its mining business and could not produce them for the rest of the perimeter, ending the Fahrenheit transaction.

What did creditors actually receive on the effective date?

Per the Q4 2025 post-confirmation report, cumulative distributions through December 31, 2025 totaled approximately $4.35 billion, comprising approximately $3.13 billion in cash, approximately $658.8 million in Ionic Digital common stock at a $20 reference price, and approximately $560.6 million in Bitcoin and Ethereum. A Fourth Distribution of approximately $344.4 million began in February 2026.

Are former Celsius customers still being sued?

Yes. The Litigation Administrator filed more than 2,000 adversary proceedings against account holders who withdrew cryptocurrency in the 90-day preference period before the petition. The court has ruled that it has personal jurisdiction over foreign customers in those proceedings, and a mass-settlement framework covering more than 750 defendants was reached in April 2025.

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