Celsius put bitcoin mining at the center of its bankruptcy pitch

Celsius Network used its first Chapter 11 hearing on July 18, 2022 to argue that bitcoin mining could help preserve value during its reorganization, even as its own court presentation disclosed approximately $4.31 billion of assets against $5.50 billion of liabilities.

That difference—about $1.19 billion, calculated from the figures Celsius presented—put a concrete scale on the shortfall confronting customers after the lender suspended withdrawals, swaps and transfers on June 12, 2022. Celsius and seven affiliated debtors had filed for bankruptcy protection in the Southern District of New York on July 13.

The July 18 proceeding before Chief Bankruptcy Judge Martin Glenn was a first-day hearing, not approval of a completed restructuring plan. Its immediate purpose was to consider interim requests that would let the companies operate under court supervision while creditors organized and larger questions remained unresolved.

Mining became the proposed route forward

Celsius’s presentation assigned $720 million of value to mining assets and described a business with more than 43,000 deployed mining rigs. Counsel said the operation was producing approximately 14.2 bitcoin per day and projected production of 10,100 bitcoin during 2022. The company also described an expansion toward 112,000 rigs during the second quarter of 2023.

Those figures were contemporaneous representations and forecasts from the debtor, not independently verified production data. They also did not demonstrate that future mining revenue would close the balance-sheet deficit. Mining economics depend on bitcoin’s price, network difficulty, electricity costs, equipment performance and the capital required to finish facilities and install machines.

Celsius nevertheless sought interim authority for spending connected to its mining operation, including payments involving construction and duties on imported rigs. Glenn granted specified operating relief on an interim basis, while the Office of the United States Trustee pressed for more detail about the proposed expenditures and the viability of continuing construction.

The distinction matters: permission to pay selected obligations preserved options during the opening phase of the case. It was not a judicial finding that the mining strategy would succeed, that Celsius’s asset valuations were realizable, or that customers would recover a particular amount.

Customer claims dwarfed liquid digital assets

The company’s July 18 presentation listed approximately $4.72 billion of liabilities associated with users while reporting about $1.75 billion of digital assets. That comparison did not determine ownership, priority or recoveries, all of which depended on account terms, bankruptcy law and later court decisions. It did show why the treatment of customer assets was becoming a central institutional question for crypto lending.

Celsius had marketed products that resembled deposits to many users, but Chapter 11 placed their contractual rights inside a formal creditor process. During the hearing, the court emphasized formation of an unsecured creditors’ committee, which was expected to provide customers with an organized role in evaluating the debtor’s conduct and any eventual plan.

The case therefore mattered beyond one failed company. It exposed how a platform could combine lending, custody-like services, proprietary risk and mining while leaving customers uncertain about their status when withdrawals stopped.

What July 18 did not resolve

No final reorganization plan was confirmed on July 18, 2022. The court did not authorize general customer withdrawals, determine ownership of every account category or guarantee recovery in cryptocurrency rather than dollars. Celsius’s mining forecasts also remained claims about future performance rather than established proceeds available to creditors.

The verified development was narrower but consequential: Celsius entered its first substantive bankruptcy hearing with a documented deficit and presented bitcoin mining as an important potential source of restructuring value. Whether that strategy could overcome its costs, execution risks and the much larger customer claims remained uncertain at the close of the proceeding.