Celsius Bankruptcy Transformation Depends on SEC’s Blessing

Celsius Network LLC recently secured court approval to emerge from Chapter 11 as Fahrenheit LLC, a public crypto mining company that would include a crypto self-staking division. But before it can implement the plan, it needs a green light from the US Securities and Exchange Commission (SEC).

Bracewell’s Keith Blackman told Bloomberg Law that the staking piece of the operation will be the bigger issue for Fahrenheit as opposed to the existing mining division. The SEC will likely scrutinize whether the company is offering unregistered tokens as part of the staking business.

The SEC has “made it clear that it considers all cryptocurrency to be securities,” Blackman said.

Judge Martin Glenn of the US Bankruptcy Court for the Southern District of New York declined to weigh in on whether certain tokens were securities when he approved the Celsius plan on November 9.

“If the SEC approves the proposed cryptocurrency mining operation but rejects the staking business, will that be sufficient to keep the new company afloat?” Blackman questioned.

Still, he said, it’s “likely the SEC will approve Celsius’ plan in some form.”

The SEC will also consider whether token sales create a conflict of interest with the mining business, Blackman said. In examining that question, the regulator’s actions against Celsius will likely be relevant, he added.

“Given the SEC’s ongoing enforcement action against Celsius’ former CEO (and settled action against Celsius itself), it’s unlikely to give Celsius the benefit of the doubt,” Blackman said.

The SEC said in a September filing that it was concerned Celsius’ plan raises similar issues to those it settled with the firm previously, namely that it was acting as an unregistered broker. Celsius in a later filing appeared to address the SEC’s concern and said it had “met frequently” with the SEC and other regulators.