On Monday, Celsius Network had a hearing scheduled at a US bankruptcy court in Manhattan. The crypto lender said in the hearing that bitcoin mining was vital to the restructuring efforts of the company.
Judge gives approval
Judge Martin Glenn gave approval to the request of Celsius Network for spending $3.7 million on the construction costs of a new facility for bitcoin mining. The company, based in New Jersey, also asked for permission for spending $1.5 million on duties and customs that are imposed on the import of bitcoin mining rigs. The bankruptcy court judge in Manhattan granted the requests.
A lawyer for the crypto lending company, Patrick Nash told the judge that bitcoin mining could give Celsius Network a way to pay back its clients. Similar to other crypto lending companies, Celsius had halted its crypto lending operations and had frozen the accounts of its clients in the weeks that eventually saw it file for bankruptcy.
According to Nash, bitcoin mining could turn out to be extremely profitable at a time when the crypto market starts rebounding.
On July 13th, Celsius Network filed for Chapter 11 bankruptcy in the United States and its balance sheet had a total deficit of about $1.19 billion. The business model of crypto lenders had come under a great deal of scrutiny after a sharp sell-off occurred in the crypto market. This was spurred on by the collapse of the TerraUSD (UST) stablecoin and its sister cryptocurrency called LUNA.
According to Nash, the extreme volatility took its toll on Celsius Network and its performance, as its assets shrank. This prompted the crypto lending platform to freeze the accounts of its customers in order to try and control the losses and bring the business back to stability.
Before Celsius Network filed for bankruptcy and after it froze customer accounts without warning, it received a lot of hate mail from its customers as well as threats. These were also sent to some of its employees. The company wants to repair its relationship with its clients and is hoping that this mining effort will help in doing so.
However, a group of equity investors stated that there could be a potential fight about the control of bitcoin mining operations. The lawyer representing Celsius’ investors, Dennis Dunne stated that there could be arguments that the coins that are minted from the mining operation belong to the UK subsidiary.
This is because it is this subsidiary that helped raise the funds for the bitcoin mining operation in the first place. Therefore, they may not end up being distributed to the lending company’s creditors. The bankruptcy watchdog of the US Department of Justice said that customers may not be happy with the company spending money on bitcoin vendors. This is because the recovery of these vendors is also in doubt, given the current bear market. Only if there is a recovery in the crypto market will things change.