- Celsius estimates it could mine 15,000 BTC next year, worth around $362 million at current prices
- The troubled lender could use the proceeds for something other than reimbursing creditors, a bankruptcy attorney told Blockworks.
Celsius is banking on its bitcoin mining business to help it restructure, but creditors and regulators don’t trust its intentions.
The bankrupt crypto lender’s balance sheet is in the red, so it is trying to find cash to fill the gaps and repay creditors. Closing DeFi loans came first, but what seems most practical now, for Celsius, is its internal mining activity.
In a July 14 statement, CEO Alex Mashinsky wrote that the lender believed its bitcoin mining would over time generate sufficient revenue for the company going forward.
A month ago, Celsius reported $5.5 billion in liabilities and $4.3 billion in assets, representing a black hole of $1.2 billion. At the time, his cash balance was only worth $170 million.
Celsius is estimated to owe $4.7 billion to more than 100,000 creditors.
Celsius Bitcoin Mining Outlook
Celsius currently has 80,850 bitcoin mining rigs, but only about half are in operation. Before filing for bankruptcy, the company planned to grow its operations to 120,000 platforms by the end of 2022.
Recent projections show that Celsius expects to generate 10,118 BTC ($244 million) this year. He believes he can mine 48% more next year, bringing the 2023 total to 15,000 BTC ($362 million) – assuming at least 11,000 platforms are online.
Celsius says it mined 3,114 BTC ($75 million) last year, just a small fraction of its total bitcoin stash. The company’s coin report filed on August 14 shows it has 14,578 BTC and 23,348 bitcoin wrapped, worth a total of $915 million at current prices.
It is expected to burn cash significantly over the next three months, including spending about $5 million a month on payroll, leaving Celsius with a projected negative cash flow of nearly $34 million for this quarter.
Clearly, Celsius cannot rely solely on the mining sector to make up for its epic losses.
But Texas regulators don’t want Celsius to sell its mined bitcoin. The lender has not explained how it plans to benefit creditors by offloading its crypto, the Texas State Securities Board (TSSB) said.
More recently, Celsius’ official committee representing unsecured creditors decided to block its attempts to sell mined cryptocurrency, per the TSSB.
Lawyers representing the committee wrote in an August 11 court filing that the effects of Celsius’ monetization on its mining operations are unclear and asked for more information.
Celsius has previously said it hopes its mining business will help repay creditors, some of whom sent threats and hate mail to the company before it filed for bankruptcy, according to Reuters.
The problem is not that Celsius wants to monetize its mining business. It’s that interested parties fear Celsius is being shrewd about what it plans to do with the money it would generate.
For Dan Besikof, bankruptcy counsel at law firm Loeb & Loeb, Celsius’s motion to sell its mined bitcoin is vague, making it difficult to pass.
“They are concerned about the extent of the relief sought in the movement – and I tend to agree with them,” Besikof told Blockworks in an interview. “The relief Celsius requested is so broad that they could monetize the coins and use the product in multiple ways.”
But skeptical viewers might also believe that Celsius is deliberately vague, strategically pursuing its own interests behind the scenes.
“For the objections of the committee and Texas, there appears to be a lack of confidence that Celsius will handle the monetization of its mined bitcoin and the correct use of the resulting product based on the many allegations pre-bankruptcy wrongdoing and under-optimal asset management,” Besikof said.
According to Besikof, it’s probably only a matter of time before communication is settled between Celsius and its opponents. They will then establish parameters on how their bitcoin monetization will look.
“I think the committee expects Celsius to engage and work with the committee to come up with a protocol for the sale or monetization of bitcoin that is acceptable to the committee and to place some limits on where the product will be held and how it may be used. ,” he said.
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