Celsius ends Ethereum staking rewards to pay back creditors
Bankrupt crypto lender Celsius Network said it will start unstaking its Ethereum holdings to generate sufficient liquidity and facilitate asset distributions to its creditors.
The announcement, made via a tweet on X, comes as part of Celsius’ ongoing restructuring process. The decision to unstake Ethereum aims to counterbalance costs incurred during the bankruptcy.
The platform’s staked Ethereum has been a source of income, providing staking rewards which have been beneficial to the estate. According to analytics firm Nansen, Celsius currently holds 32% of Ethereum awaiting withdrawal, amounting to 206,300 ETH, valued at over $466 million at current market rates.
The crypto lender filed for Chapter 11 bankruptcy protection in the New York bankruptcy court in July 2022, following a severe liquidity crisis exacerbated by the plummeting crypto market. This crisis led to the freezing of withdrawals on the platform, impacting numerous users and their assets.
As part of its bankruptcy settlement plan, Celsius has allowed qualified users to withdraw 72.5% of their crypto holdings, with this opportunity available until February 28. A court filing from September last year revealed that nearly 58,300 users held custody assets valued at $210 million.
A U.S. bankruptcy judge has given the green light to Celsius last week to shift its business focus to bitcoin mining. The collapsed lender agreed to pay $4.7 billion in a settlement with the Federal Trade Commission. Incidentally, the amount coincidentally matches the approximate debt Celsius owes to 1.7 million customers whose funds were frozen when the exchange ceased withdrawals last year.
Meanwhile, Alex Mashinsky, the founder and former CEO of Celsius, was arrested on fraud charges and is currently out on bail. He is scheduled for a jury trial on September 17.
During a hearing at the Manhattan federal court, Alex Mashinsky pleaded not guilty to multiple charges, including securities, commodities, and wire fraud, as well as manipulating the price of CEL tokens. Celsius’ chief risk officer, Roni Cohen-Pavon, is also facing the same charges. If found guilty, both executives could face lengthy prison sentences, spanning several decades.