Celsius Network LLC

UNITED STATES BANKRUPTCY COURT

SOUTHERN DISTRICT OF NEW YORK

FOR PUBLICATION

In re:

Chapter 11

CELSIUS NETWORK LLC, et al.,

Case No. 22-10964 (MG)

Debtors.

MEMORANDUM OPINION GRANTING THE WIND-DOWN MOTION

OF DEBTORS AND THE COMMITTEE FOR ENTRY OF AN ORDER

(I) APPROVING THE IMPLEMENTATION OF THE MININGCO

TRANSACTION AND (II) RELATED RELIEF

A P P E A R A N C E S:

KIRKLAND & ELLIS LLP

Attorneys for the Debtors and Debtors in Possession

601 Lexington Avenue

New York, New York 10022

By: Joshua A. Sussberg, Esq.

300 North LaSalle Street

Chicago, Illinois, 60654

By: Patrick J. Nash Jr., Esq.

Ross M. Kwasteniet, Esq.

Christopher S. Koenig, Esq.

Dan Latona, Esq.

WHITE & CASE LLP

Attorneys for the Official Committee of Unsecured Creditors

1221 Avenue of the Americas

New York, NY 10020

By: David M. Turetsky, Esq.

Samuel P. Hersey, Esq.

Joshua D. Weedman, Esq.

111 South Wacker Drive

Suite 5100

Chicago, Illinois 60606

By: Michael C. Andolina, Esq.

Gregory F. Pesce, Esq.

555 South Flower Street

Suite 2700

Los Angeles, CA 90071

By: Aaron Colodny, Esq.

Southeast Financial Center

200 South Biscayne Boulevard

Suite 4900

Miami, Florida 33131

By: Keith H. Wofford, Esq.

OFFICE OF THE UNITED STATES TRUSTEE

1 Bowling Green, Room 534

New York, NY 10004

By: Shara Cornell, Esq.

Mark Bruh, Esq.

SECURITIES AND EXCHANGE COMMISSION

100 F Street, NE

Washington, DC 20549

By: Therese A. Scheuer, Esq.

950 East Paces Ferry Rd., N.E.

Suite 900

Atlanta, GA 30326

By: William M. Uptegrove, Esq.

600 Massachusetts Avenue, NW

Washington, DC 20001

By: Andrew Currie, Esq.

MCARTER & ENGLISH, LLP

Attorneys for the Ad Hoc Borrowers Group

Worldwide Plaza

825 Eighth Avenue, 31st Floor

New York, NY 10019

By: David J. Adler, Esq.

Lisa S. Bonsall, Esq.

OFFIT KURMAN, P.A.

Attorneys for the Ad Hoc Group of Earn Account Holders

590 Madison Avenue, 6th Floor

New York, NY 10022

By: Jason A. Nagi, Esq.

1954 Greenspring Drive

Suite 605

Timonium, Maryland 21093

By: Joyce A. Kuhns, Esq.

VENABLE LLP

Attorneys for Ignat Tuganov

151 West 42nd Street

New York, New York 10036

By: Jeffrey S. Sabin, Esq.

WILLKIE FARR & GALLAGHER LLP

Attorneys for the Blockchain Recovery Investment Consortium

787 Seventh Avenue

New York, NY 10019

By: Brian S. Lennon, Esq.

Yara Kass-Gergi, Esq.

ERVIN COHEN & JESSUP LLP

Attorneys for Simon Dixon and BNK to the Future

9401 Wilshire Boulevard, 12th Floor

Beverly Hills, CA 90212

By: Chase Stone, Esq.

Pro se Creditor Anne Yeilding

Pro se Creditor Cathy Lau

Pro se Creditor Courtney Burks Steadman

Pro Se Creditor Daniel Frishberg

Pro se Creditor Georges Georgiou

Pro se Creditor Immanuel Herrmann

Pro se Creditor Jason Amerson

Pro se Creditor Kulpreet Khanuja

Pro se Creditor Lucas Holcomb

Pro se Creditor Mela Stewart

Pro se Creditor Rebecca Gallagher

MARTIN GLENN

CHIEF UNITED STATES BANKRPTCY JUDGE

Celsius Network LLC et al. (the “Debtors”) and the Official Committee of Unsecured

Creditors (the “Committee”) filed the Joint Motion of the Debtors and the Committee for Entry

of an Order (I) Approving the Implementation of the MiningCo Transaction and (II) Granting

Related Relief (the “Wind-Down Motion,” ECF Doc. # 4050) (supplemented by the declarations

of Robert Campagna (“Campagna Declaration,” ECF Doc. # 4051), Kenneth Ehrler (“Ehrler

Declaration,” ECF Doc. # 4052) and Marc D. Puntus (“Puntus Declaration,” ECF Doc. # 4128),

and the Supplemental Joint Statement Regarding the Joint Motion of the Debtors and the

Committee for Entry of an Order (I) Approving the Implementation of the MiningCo Transaction

and (II) Granting Related Relief (the “BRIC Supplement,” ECF Doc. # 4115)). Objections to the

Wind-Down Motion were filed by the United States Trustee (the “UST”), who filed the

Objection of the United States Trustee to the Joint Motion of the Debtors and the Committee for

Entry of an Order (I) Approving the Implementation of the MiningCo Transaction and (II)

Granting Related Relief (the “UST Objection,” ECF Doc. # 4097), and the Ad Hoc Group of

Borrowers (the “Borrower Group”), which filed the Preliminary Opposition of the Ad Hoc

Group of Borrowers to the Joint Motion of the Debtors and the Committee for Entry of an Order

(I) Approving the Implementation of the MiningCo Transaction and (II) Granting Related Relief

(“Borrower Objection,” ECF Doc. # 4100) (supplemented by the declaration of Christopher

Villinger (the “Villinger Declaration,” ECF Doc. # 4123)). Pro se creditor Cathy Lau filed her

Objection to the Mining Plan (ECF Doc. # 4101) and pro se creditor Anne Yeilding filed a letter

in support of the Borrower Objection (the “Yeilding Letter,” ECF Doc. # 4135).

In response, the Debtors and Committee filed the Joint Omnibus Reply of the Debtors

and the Committee in Support of the Joint Motion of the Debtors and the Committee for Entry of

an Order (I) Approving the Implementation of the MiningCo Transaction and (II) Granting

Related Relief (the “Reply,” ECF Doc. # 4129). Other creditors likewise filed responses to the

objections, supporting approval of the Wind-Down Motion.1

The UST argues that the Wind-Down Motion is a modification to the Plan (as defined

below) that requires a new solicitation and vote by all impaired creditors. Meanwhile, the

Debtors and Committee argue that the Plan, which was overwhelmingly approved by Celsius’

creditors, expressly included a “toggle” alternative to the Orderly Wind Down.2 The Debtors

assert that they have activated that toggle through the Wind-Down Motion, which proposes the

creation of a mining-only public company to be managed by US Bitcoin (the “MiningCo

Transaction”). The Debtors represent that under the MiningCo Transaction, creditors will now

receive increased distributions compared to the previously approved Orderly Wind Down, which

the Debtor and Committee argue makes a new solicitation and vote unnecessary.

Alternatively, the Debtors and Committee argue that even if the Wind-Down Motion is

determined to be a “modification,” because no impaired creditors’ recoveries are materially

1 See Ad Hoc Group of Earn Account Holders’ Statement of Position in Support of Exit and Reservation of

Rights Regarding Joint Motion of the Debtors and the Committee for Entry Of An Order (1) Approving The

Implementation Of The MiningCo Transaction; and (II) Granting Related Relief (the “Earn Statement,” ECF Doc #

4096), to which pro se creditors Daniel A. Frishberg, Courtney Burks Steadman, Immanuel J. Herrmann, Rebecca

Gallagher, Georges Georgiou, and Mela Stewart filed a joinder (ECF Doc. # 4154); the Statement of Ignat Tuganov

in Support of the Debtors’ and Committee’s Joint Motion for Entry of an Order Approving Implementation of the

MiningCo Transaction (ECF Doc. # 4136); the Letter In Support Of: Joint Motion Of The Debtors And The

Committee For Entry Of An Order (1) Approving The Implementation Of The MiningCo Transaction And (II)

Granting Related Relief filed by Simon Dixon and David Kahn on behalf of BNK To the Future (ECF Doc. # 4124);

and the Reservation of Rights of the U.S. Securities and Exchange Commission to Joint Motion of the Debtors and

the Committee for Entry of an Order (I) Approving the Implementation of the MiningCo Transaction and (II)

Granting Related Relief (ECF Doc. # 4099).

2 All capitalized terms not otherwise defined have the definitions set forth in the Plan or the Disclosure

Statement (the “Disclosure Statement,” ECF Doc. # 3332).

adversely affected, applicable law does not require a new disclosure statement, solicitation, or

vote.

On December 21, 2023, the Court held a hearing on the Wind-Down Motion (the

“Hearing”). For the reasons explained below, the Court agrees with the Debtors and the

Committee. Therefore, the Wind Down Motion is GRANTED, and all objections are

OVERRULED.

I. BACKGROUND

The confirmed Plan and Disclosure Statement (ECF Doc. #3332), overwhelmingly

approved by creditors, provides two alternative paths forward, depending on regulatory and other

approvals: First, the NewCo Transaction (as defined below), which included the creation of a

public company with multiple lines of business, and second, the Orderly Wind Down, which

included the creation of a public company focused solely on bitcoin mining. In either scenario,

creditors would receive part of their recovery through stock in the newly created company.

The Orderly Wind Down was to be implemented in the event the NewCo Transaction

could not be consummated for any reason, including a negative regulatory determination. As it

has turned out, the SEC denied relief required to implement the NewCo Transaction. For that

reason, the Debtors, with the Committee’s support, have switched to the second path approved

by creditors: the Orderly Wind Down. Toggling to the Orderly Wind Down requires the Debtors

to obtain approval of the Wind-Down Motion, which seeks implementation of the MiningCo

Transaction, so the Debtors can emerge from bankruptcy without the attendant cost and delay of

soliciting a new plan. (See Confirmation Order ¶ 354.)

The Plan also explains that the details of the Orderly Wind Down, including the identity

of the mining manager, the budget, fees, and disbursements associated with the Orderly Wind

Down, and the mechanics and procedures to effectuate it, would be included in the Wind-Down

Motion, to be filed on 10 days’ notice to creditors, as has been done here. (Plan Art. I.A.270.)

A. The Marketing and Auction Process

In October 2022, the Debtors commenced a robust marketing and sale process for all or

substantially all of their assets. (Wind-Down Motion ¶ 16.) On February 15, 2023, the Debtors

announced that they had reached an agreement in principle with NovaWulf Digital Management,

LP (“NovaWulf”) for NovaWulf to manage the Debtors’ reorganized business. (Id. ¶ 17.) In the

wake of that announcement, other bidders expressed interest in a similar management structure,

and NovaWulf served as the stalking horse bidder for a plan sponsor transaction. (Id.)

Following an auction, on May 25, 2023, the Debtors filed a Notice of Successful Bidder and

Backup Bidder (ECF Doc. # 2713), identifying Fahrenheit LLC (“Fahrenheit”) as the successful

bidder and the Blockchain Recovery Investment Consortium (the “BRIC”) as the backup bidder.

(Id. ¶ 18.)

B. Plan Confirmation and the SEC Pre-clearance Denial

On November 9, 2023, the Court entered an order confirming the Debtors’ chapter 11

plan (the “Confirmation Order,” ECF Doc. # 3972, and the chapter 11 plan, the “Plan,” Exhibit

A thereto). The Plan contemplated a primary transaction whereby the Debtors would make an

initial distribution of liquid cryptocurrency, and Fahrenheit as Plan Sponsor would manage and

monetize the Debtors’ illiquid assets, including the Bitcoin mining and cryptocurrency staking

operations, as a public company (the “NewCo Transaction”). (Wind-Down Motion ¶ 19.)

Creditors would receive distributions of the NewCo stock in addition to the liquid

cryptocurrency. (Id.) The NewCo Transaction included $450 million of liquid cryptocurrency

as seed funding. (Plan Art. I.A.165.) The NewCo Transaction also included an initial funding of

$39.5 million by US Bitcoin to fund the buildout and energization of mining facilities. (Plan.

Art. I.A.161.) Fahrenheit would also be obligated to fund $50 million as its “Plan Sponsor

Contribution.” (Plan Art. I.A.185.)

The Plan also contemplated a secondary transaction, the Orderly Wind Down (“OWD”),

to which the Debtors could “toggle” if the NewCo Transaction was not feasible. (Wind-Down

Motion ¶ 23.) If activated, the OWD would eliminate certain provisions related to the NewCo

Transaction and substitute provisions for a mining-only public company. (Id.) During this time,

it was understood that the BRIC would serve as the backup bidder if the Debtors pursued the

OWD.

Shortly after the Confirmation Order was entered, the SEC informed the Debtors that it

would not approve the pre-clearance letter for the NewCo Transaction, but that it would not

require pre-clearance for the Debtors to pursue registration of a mining-only company.3 (Id. ¶ 1.)

On November 30, 2023, the Debtors filed the Wind-Down Motion.

C. Post-Confirmation Developments

Debtors submit that, since execution of the Backup Plan Sponsor Agreement (entered

into with the BRIC), they have made substantial progress preparing for the implementation of the

Plan under either the NewCo Transaction or the MiningCo Transaction, which reduces the need

for many of the services initially envisioned under the Backup Plan Administration Agreement

Term Sheet. (Wind-Down Motion ¶ 29.) These include (1) Christopher Ferraro agreeing to

serve as the plan administrator for at least a year (id.); (2) negotiating the Litigation

3 To obtain pre-clearance from the SEC, the Debtors were required to submit audited financial statements to

the SEC. While the Debtors’ historical Mining business had audited financial statements, the “staking” business that

was operated by a different Celsius entity did not have audited financial statements. (Wind-Down Motion ¶ 20.)

The SEC was unwilling to waive the requirement. Without pre-clearance, the Debtors concluded it was not feasible

to pursue the NewCo Transaction.

Administrator Agreement and distribution agreements with Coinbase and PayPal, which together

provide for substantially all the non-mining services contemplated under the Backup Plan

Administration Agreement Term Sheet at a major discount (id. ¶ 30); (3) eliminating or

significantly reducing the need for a number of services by converting altcoins to BTC, ETH,

and cash, streamlining the Claims resolution process through the Class Claim Settlement, and

monetizing certain illiquid assets (id. ¶ 31); (4) acquiring the Cedarvale site through the Core

Scientific settlement (id. ¶ 32); and (5) retaining RSM US LLP to audit the mining business’

financial statements (id. ¶ 33).

Accordingly, the Backup Plan Sponsor Agreement with BRIC, which contemplated, inter

alia, distribution agents, management of illiquid assets, and a separate litigation administrator, is

obsolete and non-executable. (Id. ¶¶ 27–28; 35.)

D. The Wind-Down Motion

The Debtors submit that the decision to toggle to the OWD with US Bitcoin rather than

the BRIC fits squarely within the Plan and the Confirmation Order. Though the BRIC was

initially identified as the Backup Plan Sponsor on the terms set forth in the Backup Plan Sponsor

Agreement, the Plan and Disclosure Statement contemplated that the Debtors “may select a

different Backup Plan Sponsor if a different party provides terms superior to those offered by

[the] BRIC,” and that such other party may be US Bitcoin. (Wind-Down Motion ¶ 25 (quoting

Disclosure Statement Art. III.I). See also id. Art. II.B.2; Plan Art. IV.E.1 (“Concept eliminated,

unless US Bitcoin is selected as the mining manager in connection with the Orderly Wind

Down.”).) The Backup Plan Sponsor Agreement (with the BRIC) would become operative

“subject to a market test.” (Wind-Down Motion ¶ 25 (citing Plan Art. IV.E.1).) The

Confirmation Order authorizes this process. (Id. ¶ 45 (citing Confirmation Order ¶ 354).)

Following news of the SEC pre-clearance denial, the Debtors performed the market

check, and determined that US Bitcoin offered terms superior to those the BRIC had offered.

35, 37.) Accordingly, they argue that the MiningCo Transaction is squarely within the

terms of the Plan. (/d. § 45.)

1. The Campagna Declaration

The Wind-Down Motion is supplemented by the Campagna Declaration. Campagna is a

managing director of Alvarez & Marsal, restructuring advisor to the Debtors. (Campagna

Declaration § 1.) Attached as Exhibit A to the Campagna Declaration 1s an illustrative waterfall

(“Recovery Waterfall,” Campagna Declaration at Ex. A) that illustrates initial cryptocurrency

distributions and final recovery to creditors under three scenarios: (1) the original OWD

projections, which used prices as of May 31, 2023; (2) the MiningCo Transaction with prices as

of May 31, 2023; and (3) MiningCo Transaction with prices as of November 17, 2023.

(Recovery Waterfall.) The full Recovery Waterfall is as follows:

Filed Disclosure Statement

ee eg ees) Eee gee) I Ee ees |

!

Liquid Cryptecurrency $ 2,057 $ 2,657 | $ 2.041

Less: Post Emergence Costs to the Estate (1683) (75) I (75)

Less: Litigation Administration Funding (50) (50) | (50)

Less: Mining Business Capitalization (50) (225) I (225)

Net Liquid Cryptocurrency $ 2,394 $ 2,407 | $ 2,594

!

Less: Distribution to Claims

Administrative Claims 3 (85) 3 (70) I 3 (70)

Convenience Class Claims (242) (242) | (242)

Custody Claims (208) (206) I (124)

Withhold Claims (Eligible 15% Distribution) (2) (2) | (2)

Liquid Crypto Available for Unsecured Claims $ 41,859 $ 41,787 | $ 2,153

Hliquid Assets $ 306 $ 306 | $ 305

!

Mining Business Valuation 5 424 3 565 | 5 565

Less: Capitalization presumed in Mining Valuation (50) (50) I (50)

Plus: Mining Business Capitalization 50 225 | 225

MiningCo Net Asset Value § 434 5 74ao | § Tao

Remaining Distributable Value s 2.588 § 2.832 s 3158

Total Remaining Claims $ 4,225 $ 4,225 | $ 4,225

Initial Liquid Cryptocurrency Distribution % 44.0% 42.3% 51.0%

Wind Down Pericd Iliquid Asset Recovery % 7.2% F.2% | 7.2%

MiningCo Common Stock Recovery % 10.0% 7.5% I 17.5%

Total Recovery % 61.2% 67.0% | 75.7%

10

2. The BRIC Supplement

The BRIC was originally the Backup Plan Sponsor in the event of the OWD and

following the Debtors’ filing of the Wind-Down Motion, indicated that it would seek to enforce

its status as such. (Wind-Down Motion ¶ 36.) However, the Debtors and the BRIC came to an

agreement which resolved the BRIC’s objection, as outlined in the BRIC Supplement. Annexed

as Exhibit A to the BRIC Supplement are the material terms of the agreement (the “BRIC Term

Sheet,” BRIC Supplement at Ex. A). The BRIC Term Sheet provides that the final governing

agreement (the “BRIC Agreement”) will be substantially similar to the Litigation Administrator

Agreement in the Plan Supplement, except as modified by the BRIC Term Sheet. (BRIC

Supplement at 10.) The Debtors have filed a pending motion to file under seal certain portions

of the BRIC Agreement. (See ECF Doc. # 4116.)

Under the BRIC Agreement, the BRIC will serve as Litigation Administrator and will be

responsible for monetizing certain of the Debtors’ illiquid assets and certain claims and causes of

action of the Debtors’ Estates. (BRIC Supplement ¶ 3.) This outcome is expressly contemplated

by the Plan, which permits the Committee to appoint “one or more Litigation Administrators to

prosecute, settle, or otherwise resolve any remaining Disputed Claims.” (Id. (quoting Plan Art.

IV.G) (internal quotation marks omitted).)

The Debtors clarify that the resolution with the BRIC does not modify the agreement

with US Bitcoin described in the Wind-Down Motion. (Id. ¶ 4.) Rather, it is a separate

agreement under which the BRIC will monetize certain illiquid assets for the benefit of the

Debtors’ creditors. (Id.) The fees in the BRIC Agreement will be funded by reductions in the

Plan Administrator and Litigation Oversight Board’s initial budgets. (Id. ¶ 5.) The below table

compares the reallocation of the Wind-Down Budget among the Plan Administrator, the BRIC,

and the Litigation Administrator under each of the NewCo and MiningCo Transactions:

NewCo Transaction MiningCo Transaction

Litigation Administrator Budget $50 million $40 million

Plan Administrator Budget $75 million $70 million

BRIC Litigation Administrator $0 $15 million

Cash Fee

TOTAL $125 million $125 million

(Id.)

The BRIC Term Sheet provides that BRIC will be paid $5 million per year, plus a 5%

recovery incentive fee for assets recovered, and 10% of litigation recoveries. (Id. at 11.)

The Debtors add that as a Litigation Administrator, the BRIC will be subject to oversight

by a sub-committee of the Litigation Oversight Committee. (Id. ¶ 6.) Furthermore, the

Litigation Oversight Committee will approve the BRIC’s budget (which will not result in

additional incremental costs to the Debtors’ Estates), and the BRIC will bear the cost of any

financial advisors retained for the purpose of assisting it in its role as a Litigation Administrator,

which is the primary justification for the reduction in the applicable budgets and BRIC’s cash

fee. (Id.)

E. Objections

The two salient objections are from the UST and the Borrower Group.

1. UST Objection

The UST argues that the MiningCo Transaction is a modification to the Plan that requires

a new disclosure statement and vote.

First, the UST argues that the MiningCo Transaction is a material and substantial

modification of the Plan as it changes the legal relationships between and among the Debtors,

unsecured creditors, and MiningCo. (UST Objection at 17.) Specifically, the UST asserts that

the MiningCo Transaction changes the mining manager originally contemplated under the Plan

from the BRIC to US Bitcoin. (Id. at 18.) The UST indicates that the Debtors have already paid

the BRIC $1.5 million attributable to its breakup fee and reimbursement for its expenses. (Id.)

Until the November 30, 2023 hearing, the Debtors supported a pivot to the OWD as proposed

and disclosed in the Plan and Disclosure Statement (the “Original OWD”) with the BRIC as the

Backup Plan Sponsor. (Id.)

Second, the UST argues that the MiningCo Transaction alters substantive rights of

creditors, as it will change the amounts and type of funds recoverable, which will also likely

impact the timing and rate of payments. (Id. at 19–20.) Specifically, the UST asserts that the

Plan’s current distribution structure required a technical mechanism for determining the

percentage and type of account holders receiving crypto assets versus stock in the proposed

public NewCo. (Id. at 20.) In contrast, the UST states that the MiningCo Transaction does not

provide finality regarding the valuation of the stock to be distributed. (Id.) The UST thus

concludes that this change materially alters the Plan and the distributions thereunder. (Id.)

Third, the UST argues that the proposed funding under the MiningCo Transaction is

dramatically different than that proposed under the Plan. (Id. at 20.) The UST argues that the

Disclosure Statement, the Plan, the BRIC Term Sheet, the various declarations, and the Wind-

Down Motion use different comparative charts and terminology, making comparison difficult.

(Id. at 20–21.) Moreover, the NewCo Transaction included a $450 million contribution from the

Debtors in liquid cryptocurrency as opposed to the Wind-Down Motion’s proposal of a $225

million in fiat contribution from the Debtors. (Id. at 21.) In contrast, the Original OWD did not

contemplate funding the mining facility over and above the initial $50 million contribution. (Id.)

The UST thus argues that if customer cryptocurrency will be used to fund the mining facilities

under the MiningCo Transaction, creditors should be allowed to vote on whether to reinvest or

distribute it. (Id. at 21.)

Fourth, the UST argues that the MiningCo Transaction is missing critical details that

would be required by an amended disclosure statement. (Id.) Specifically, the UST argues that

the Wind-Down Motion failed to disclose critical details such as board member compensation of

the proposed MiningCo. (Id. at 22.) The UST thus concludes that a new disclosure statement

should be required, and absent such, the Wind-Down Motion should be denied. (Id.)

2. The Borrower Objection

The Borrower Group argues that the MiningCo Transaction is a material modification as

a matter of fact and law, and that this Court lacks jurisdiction to hear the proposed MiningCo

Transaction pending appeal of the Confirmation Order. Counsel for the Borrower Group filed

the Villinger Declaration in support of the Borrower Objection. Pro se creditor Anne Yeilding

filed the Yeilding Letter in support of the Borrower Objection.

The Borrower Group argues that the MiningCo Transaction has “material impact” on

creditors and thus requires new disclosures, re-solicitation, and a new vote. (Borrower Objection

¶¶ 32, 37.) Specifically, the Borrower Group argues, the MiningCo Transaction is “materially

different from the [Original OWD] because it trebles the previously disclosed capital

requirements . . . and diverts $175 million of liquid cryptocurrency from creditors to an equity

investment in MiningCo.” (Id. ¶ 27.) There is “nothing in the Disclosure Statement notifying

creditors” about a potential diversion of cryptocurrency to an investment in MiningCo. (Id. ¶

32.) The Borrower Group argues that the under the Original OWD, but with prices calculated as

of November 17, 2023 (rather than May 31, 2023), the initial liquid cryptocurrency distribution

percentage is 4% greater than the MiningCo Transaction as of November 17, 2023 prices. (Id. ¶

19.) Further, the Borrower Group argues that the Wind-Down Motion and accompanying

declarations failed to recalculate the Recovery Mix (defined below). By its calculation, the new

Recovery Mix reflects a 9% decrease in liquid cryptocurrency. (Id. ¶ 21.)

The Borrower Group also argues that the MiningCo Transaction is a modification of the

Plan as a matter of law. Specifically, the Borrower Group argues that in support of the Wind-

Down Motion, the Debtors cite In re Johns-Manville Corp., 920 F.2d 121, 128 (2d Cir. 1990), to

justify their position that “changes contemplated by the confirmed plan were not

‘modifications.’” (Id. ¶ 33 (citing Wind-Down Motion ¶ 45).) However, they argue, the

Debtors’ own press release expressly states they would seek to have the Court “approve

modifications to the Plan to reflect the [MiningCo Transaction],” contradicting their current

statements. (Id. (citing Notice of Press Release, ECF Doc. # 4017 at Ex. A).) The Borrower

Group further argues that the Plan provided an alternative to the NewCo Transaction in the form

of the Original OWD. (Id. ¶ 37.) Accordingly, the Borrower Group emphasizes that the most

expeditious way forward is to implement the Original OWD, and anything else would require a

re-solicitation. (Id. ¶¶ 37, 39.) The Villinger Declaration supports the Borrower Objection,

arguing that the terms of the MiningCo Transaction were not adequately disclosed, and seeks

leave for Mr. Villinger to change his vote on the Plan. (Villinger Declaration ¶ 11.)

Finally, the Borrower Group argues that this Court lacks jurisdiction to decide the Wind-

Down Motion because the requested relief seeks to revise the Confirmation Order, which is

currently on appeal. (Borrower Objection ¶¶ 40–42.)

F. The Joint Reply

The Debtors firmly maintain that the MiningCo Transaction is not a modification, but

even if it were, it would only require re-solicitation if the modification was material and adverse,

which is not the case here, as creditors will receive increased recoveries—specifically, $294

million more than under the Original OWD. (Reply ¶¶ 6, 24.)

They argue that the change from $50 million to $225 million is a “budget and

disbursement” detail of the OWD over which they had discretion. (Id. ¶ 7; see also id. ¶ 20

(citing Disclosure Statement at 12).) Furthermore, there is “no meaningful economic difference

to creditors between a dollar of Liquid Cryptocurrency distribution and a dollar added to the

balance sheet of MiningCo when creditors get the value either way.” (Id. ¶ 7.) They point out

that both the rise in cryptocurrency prices and the progress made since the Disclosure Statement

was filed results in more liquid cryptocurrency recovery than projected under the Original OWD.

(Id. ¶ 9.) They also take issue with the Borrower Group’s calculations which ignore the “$88

million of cost savings” realized through the current agreement, as well as the increased value of

MiningCo. (Id. ¶ 23.)

Debtors maintain that the Court retains jurisdiction because Wind-Down Motion relates

to implementation of a plan. (Id. ¶ 46.) And even if the MiningCo Transaction was a

modification, the issues on appeal are unrelated, and the Court retains jurisdiction over the issues

relevant to the Wind-Down Motion (i.e., the terms of the OWD). (Id. ¶¶ 47–48.)

II. LEGAL STANDARD

A. Modification of a Plan

Section 1127(b) of the Bankruptcy Code provides, in relevant part:

(b) The proponent of a plan or the reorganized debtor may modify such plan at any

time after confirmation of such plan and before substantial consummation of such

plan, but may not modify such plan so that such plan as modified fails to meet the

requirements of sections 1122 and 1123 of this title. Such plan as modified under

this subsection becomes the plan only if circumstances warrant such modification

and the court, after notice and a hearing, confirms such plan as modified,

under section 1129 of this title.

11 U.S.C. § 1127(b).

Modification of a confirmed plan is thus only permitted if: (a) it is done by a “proponent

of a plan or the reorganized debtor,” (b) it occurs before “substantial consummation” of the plan;

(c) the plan as modified meets the requirements of sections 1122 and 1123 of the Bankruptcy

Code; (d) the proponent complies with the disclosure requirements of section 1125; (e)

circumstances warrant such modification; and (f) the court, after notice and a hearing, confirms

the modified plan under section 1129 of the Bankruptcy Code. 11 U.S.C. § 1127(b).

Accordingly, any modification must comply with section 1122’s restrictions on the

classification of claims and interests and section 1123’s requirements for the contents of a

reorganization plan. Id. Thus, unless the disfavored class members consent, a modified plan

must “provide the same treatment for each claim or interest of a particular class.” 11 U.S.C. §

1123(a)(4). There are also procedural constraints. A modification must comply with section

1125’s requirement that claim and interest holders be given adequate information about the

contents of a plan. 11 U.S.C. § 1127(c).

Modification is not defined in section 1127 of the Bankruptcy Code. See, e.g., State

Government Creditors’ Committee for Property Damage Claims v. McKay (In re Johns-Manville

Corp.) (“Johns-Manville I”), 920 F.2d 121, 128 (2d Cir. 1990); Cohen v. Tic Fin. Sys. (In re

Ampace Corp.), 279 B.R. 145, 152 (Bankr. D. Del. 2002). Courts generally determine whether a

modification has been proposed on a case-by-case basis. See In re Boylan, 452 B.R. 43, 47

(Bankr. S.D.N.Y. 2011) (citing 7 COLLIER ON BANKRUPTCY, ¶ 1127.03 (16th ed. Rev. 2011)).

One consideration is the distinction between a “modification” and a “clarification” of a plan. If

the change is simply a clarification, then the requirements of section 1127 of the Bankruptcy

Code do not apply. If the change is a modification, however, then the requirements of section

1127 must be met. See, e.g., In re Oakhurst Lodge, Inc., 582 B.R. 784, 798 (Bankr. E.D. Cal.

2018) (“A settlement that ‘alters the legal relationships among the debtor and its creditors’ under

the confirmed plan constitutes a plan modification.”); see also Matter of Highland Capital

Management, L.P., 57 F.4th 494, 503 (5th Cir. 2023) (holding that a change that “alters the

parties’ rights, obligations, and expectations” constitutes a plan modification).

The Second Circuit has delineated between “procedural” modifications, which may be

permitted to the extent the Bankruptcy Court’s authority to order such procedural modifications

is reserved by the plan and such modification does not impact the “substantive rights” of

claimants. See, e.g., Johns-Manville I, 920 F.2d 121, 128 (2d Cir. 1990) (finding that because

the proposed modification was sought pre-consummation and the class members’ substantive

rights would not be altered, it was permissible); Findly v. Blinken (In re Johns-Manville Corp.)

(“Johns-Manville II”), 982 F.2d 721 (2d Cir. 1992) (holding, in part, that plan modification

violated section 1127(b) because it would modify the rights of health claimants under the

confirmed plan by changing the rights as to amounts recoverable and as to timing and rate of

payments).

Only when a modification is substantive—i.e., it materially and adversely affects

claimants—are they entitled to a new disclosure statement and another opportunity to vote. In re

Sentinel Management Group, Inc., 398 B.R. 281, 301 (Bankr. N.D. Ill. 2008) (stating that “a new

disclosures statement is not required in every instance where a modification is made”); In re

American Solar King Corp., 90 B.R. 808, 825 (Bankr. W.D. Tex. 1988) (citing S. Rep. No. 989,

95th Cong, 2d Sess. 124 (1978), U.S. Code Cong. & Admin. News 1978, p. 5910) (stating that if

a “modification materially and adversely affects any of [the voting parties’] interests, they must

be afforded an opportunity to change their vote”). See also In re Am.-CV Station Grp., Inc., 56

F.4th 1302, 1309 (11th Cir. 2023) (holding that debtor must provide a new disclosure statement

and call for another round of voting if “after a hearing, the bankruptcy court finds that the

modification ‘materially and adversely changes the way that claim or interest holder is treated’”).

Moreover, the requirements of section 1127 apply even when the plan documents in

question contemplate the possibility of amendments. In re Ionosphere Clubs, Inc., 208 B.R. 812,

816 (S.D.N.Y 1997) (“The fact that the lease in this case . . . contemplated consensual

modifications by the parties is of no consequence, as the surrender of the right of first refusal was

an integral part of the reorganization plan and confirmation order.”).

III. DISCUSSION

The Plan and Disclosure Statement explicitly provide for the possibility of an alternate

Backup Plan Sponsor on terms superior to those negotiated with the BRIC. The Confirmation

Order authorizes this toggle if “the Debtors, the Committee, and their respective advisors

determine in good faith that, consistent with their fiduciary duties, an Orderly Wind Down is in

the best interest of the Estates.” (Confirmation Order ¶ 354.) Thus, the inquiry is (1) whether

the terms of the US Bitcoin deal are better than those of the BRIC deal, and (2) if so, whether

any of the modified terms are materially adverse to creditors such that the change (although

contemplated) nevertheless constitutes a modification requiring re-solicitation.

The Court finds that the MiningCo Transaction falls within the terms of the Plan and is

thus not a modification. However, even if it were a modification, the Court finds that it would

not be materially adverse to creditors, and thus would not require re-solicitation.

The Borrower Group’s argument is that the Court should order the Debtors to pursue the

Original OWD. This is not possible. Given the many outdated and obsolete terms, the two paths

available to the Debtors are the MiningCo Transaction, or a re-solicitation and re-voting on the

MiningCo transaction that would drain significant value from the Debtors’ Estates and further

delay recoveries. The UST and Borrower Group’s argument that the MiningCo Transaction is a

modification is flatly contradicted by the language of the Plan and Disclosure Statement.

A. The Plan and Disclosure Statement Contemplate an Alternate Backup

Sponsor

Article I.A of the Plan contains the following relevant definitions:

17. “Backup Plan Administration Agreement Term Sheet” means the term sheet

attached to the Backup Plan Sponsor Agreement as Exhibit A that contains the

terms and conditions under which the BRIC has agreed to serve as the Plan

Administrator in the event that the Orderly Wind Down is consummated.

18. “Backup Plan Sponsor” means the BRIC.

19. “Backup Plan Sponsor Agreement” means that certain agreement, dated June 7,

2023, by and among the Debtors, the Committee, and the BRIC, including all

exhibits, annexes, and schedules thereto, as such agreement may be amended,

restated, amended and restated, modified, or otherwise supplemented from time to

time in accordance with its terms.

20. “Backup Plan Sponsor Transaction” means, as contemplated by the Backup

Plan Sponsor Agreement, an Orderly Wind Down, including: (a) the creation of the

Backup MiningCo; (b) a Liquid Cryptocurrency distribution to creditors on or as

soon as practicable after the Effective Date; and (c) a timely monetization of the

remaining assets of the Debtors’ estates and subsequent Liquid Cryptocurrency

distributions to creditors from the proceeds thereof.

(Plan Art. I.A.17–20.)

Section IV.E.1 of the Plan describes the process by which the Debtors could elect to

toggle to the OWD. It contains a chart summarizing the changes between the NewCo

Transaction and the OWD. Selected relevant entries are as follows:

we meet

Provision/Concept

NewCo Concept eliminated, replaced in certain places with “Post-Effective Date

Debtors” and ‘Plan Administrator,” as further described herein and as

applicable. Related concepts, such as “NewCo Capitalization Amount”

will similarly be eliminated.

Plan Sponsor Concept eliminated. Related concepts, such as “Management

Contribution Compensation” (and its component concepts) will similarly be eliminated.

NewCo Common | Concept eliminated, replaced with “Backup MiningCo Common Stock”

Stock and “Tlliquid Recovery Rights,” as applicable.

Unsecured Claim | Concept eliminated, all Holders of Claims to receive Pro Rata share of

Distribution Mix | consideration without adjustment for Unsecured Claim Distribution Mix

Elections Elections.

Wind-Down Concept to become operative. As provided herein, the Debtors shall file

Procedures the Wind-Down Procedures within fourteen (14) days of the decision to

implement an Orderly Wind Down, in connection with the Wind- Down

Motion. Such procedures shall provide additional details regarding the

Wind-Down Assets, the Wind- Down Budget, the identity of the Mining

manager, and any revisions to the Wind-Down Procedures and shall be

subject to approval by the Bankruptcy Court in connection with Wind-

Down Motion. Related concepts shall similarly become operative.

Backup Plan Concept becomes operative, subject to a market test of the fees contained

Sponsor & Backup| in the Backup Plan Administrator Term Sheet; provided that (1) Liquid

Plan Sponsor Cryptocurrency, (ii) the Backup MiningCo Common Stock, (iii) Iliquid

Transaction Recovery Rights, and (iv) Litigation Proceeds shall be distributed

according to this Plan, as revised to reflect the toggle to the Orderly

Wind Down.

US Bitcoin Concept eliminated, wn/ess US Bitcoin is selected as the Mining manager

Agreements in connection with the Orderly Wind Down.

(Plan Art. [V.E.1 (emphasis added).)

The “Backup Plan Sponsor” is defined as the BRIC in Article I.A.18 of the Plan, but as

set forth in Article IV.E.1, that definition (and the related definition of “Backup Plan Sponsor

21

Transaction”) become operative “subject to a market test of the fees.” (Plan Art. IV.E.1.) The

language of the Plan clearly thus provides for the possibility of an alternate Backup Plan

Sponsor: specifically, it contemplates the selection of US Bitcoin, whose agreements are

terminated “unless [it] is selected as the Mining manager.” (Id.)

The Disclosure Statement clearly describes this possibility as well:

If the Debtors pivot to the Orderly Wind Down, they will do so on the terms set

forth in the Backup Plan Sponsor Agreement that they have negotiated with the

Backup Plan Sponsor, [the BRIC] . . . or on terms that provide a better recovery to

the Debtors’ creditors than the Backup Plan Sponsor Agreement, which terms may

be with a different Backup Plan Sponsor than the BRIC . . . . The Debtors may

select a different Backup Plan Sponsor if a different party provides terms superior

to those offered by BRIC.

(Disclosure Statement Art. III.I. (emphasis added); see also id. Art. II.B.2 (same).)

Because the Disclosure Statement and Plan explicitly contemplate and allow for the

introduction of an alternate Plan Sponsor, the Borrower Group and UST’s argument that it is a

per se modification under the Plan fails.

B. The Debtors Meet the Plan’s Requirements to Switch Backup Plan Sponsors

Under the terms of the Plan, the Backup Plan Sponsor Transaction becomes operative

“subject to a market test of the fees” in the Backup Plan Administrator Term Sheet. (Plan Art.

IV.E.1.) The Disclosure Statement echoes this, providing that Debtors may select “a different

Backup Plan Sponsor if a different party provides terms superior to those offered by BRIC.”

(Disclosure Statement Art. III.I.) The “terms” of an agreement with a backup bidder would

include, inter alia, items such as management fees, disbursement timelines, and control

provisions. Debtors must thus demonstrate that the terms of the agreement with US Bitcoin are

superior.

The Disclosure Statement further requires that the pivot “provide a better recovery to the

Debtors’ creditors than the Backup Plan Sponsor Agreement.” (Disclosure Statement Art. III.I

(emphasis added); fd. II.B.2 (stating the same).) Thus, the MiningCo Transaction must provide

creditors with a higher recovery as compared to the Original OWD, the recoveries for which

were calculated as of May 31, 2023 (the “Original OWD Recoveries”).

The MiningCo Transaction must meet the requirements of the Plan and Disclosure

Statement, such that (1) the terms negotiated with US Bitcoin must be superior to those

negotiated with the BRIC, and (2) recoveries under the MiningCo Transaction must be better

than the Original OWD Recoveries. The Court finds that both conditions are met.

1. Comparison of Terms

Although the relevant inquiry is between the US Bitcoin transaction and the BRIC

transaction, in many places the Debtors frame the comparison as between the MiningCo

Transaction and the NewCo Transaction. Debtors submit that “[t]he terms and economics of the

proposed US Bitcoin-led MiningCo Transaction, while substantively similar to the terms agreed

to as part of the broader Fahrenheit NewCo Transition, are now meaningfully improved from an

economic and qualitative perspective.” (Wind-Down Motion § 37.) Included in the Wind-Down

Motion is the following comparison of the terms of NewCo versus the MiningCo:

sou Co Oe Betike can TO Bethe cain

Contributed Assets | Mining Assets, DeFi Mining Assets (remainder of assets to

Cryptocurrency Assets, be monetized by Plan Administrator

Institutional Loan Portfolio, and and Litigation Administrator)

PE & VC Investments

Capitalization $450 million of Liquid $225 million in fiat

Amount Cryptocurrency

Initial Business Bitcoin Mining, Ethereum Bitcoim Mining

Lines Staking, Monetizing Illiquid

Assets

23

Equity $33,188,119 initially; total of $50 | $12,752,400 initially; total of

Investment million if management agreement | $15,940,500 if management agreement

(i.e., Plan is extended to five years is extended to five years

Sponsor

Contribution

Management Fee Total of $35 million per year Total of $20,376,200 per year to US

and Mining © Management Fee to Fahrenheit: Bitcom, inclusive of both management

Management Fee $20 million per year (one and mining management services

third of which would be paid

to US Bitcoim)

e Management Fee to US

Bitcom: $15 million per year

Equity Fee 5% of Newco Common Stock on a [1.28% of MiningCo Common Stock in

fully diluted basis both restricted stock units and warrants

on a fully diluted basis (equivalent to US

Bitcoin’s share of the equity fee owed

nder the NewCo Transaction)

Estimated Liquid Approximately $2.03 billion (using] Approximately $2.6 billion (consisting

ryptocurrency cryptocurrency prices as of May _ | of changes in cryptocurrency prices

Distributions 31, 2023). from May 31, 2023 through November

17, 2023, plus additional Liquid

Cryptocurrency available for

distribution pursuant to the MiningCo

Transaction)

omposition of Nine members: Fight members:

Board of Directors e three of whom will be e the six members previously

appointed by the Plan appointed by the Committee and

Sponsor; approved by the Court; and

e §=four of whom will be e two members to be appointed by

appointed by the Committee US Bitcoin, expected to be Asher|

in its sole discretion; and Genoot and Jordan Levy.

e two of whom will be

appointed by the Committee | Three Board Observers (same as

and consented to by the Plan | previously approved by the Court).

Sponsor.

Identities of the New Board were

set forth in the Plan Supplement

and approved by the Court.

Three Board Observers.

(Id. 9.)

24

However, as stated above, the relevant comparison is between the terms of the BRIC

transaction and the US Bitcoin transaction, which they do not provide as explicitly. The UST

raises this concern as well: “[t]he Disclosure Statement, the Plan, [t]he BRIC Term Sheet, the

various declarations, and the [Wind-Down] Motion, all use different comparative charts and, in

some instances, different terminology, making comparison difficult.” (UST Objection at 20.)

Because of the many developments in the case between the BRIC Agreement and now,

many of the terms in that agreement are now obsolete, so it is not a direct apples-to-apples

comparison. Indeed, many of those terms are now filled in by an array of other agreements,

including agreements with crypto distribution agents, the BRIC Agreement, and, of course, the

terms of the MiningCo Transaction. These terms span a variety of dimensions, including

management fees, services to be provided, board composition, control provisions, and the like.

Many of these are within the business judgment of the Debtors. Accordingly, the Court focuses

on the more measurable and more salient impact on the creditors: namely, the recoveries they

receive.

2. Borrower Group Objection

The Borrower Group’s chief objection is that the Wind-Down Motion provides (1) less

initial cryptocurrency recovery and (2) an overall smaller portion of the total recovery in liquid

cryptocurrency, when comparing to the Original OWD calculated with cryptocurrency prices as

of November 17, 2023.

The Borrower Group is the only creditor constituency that has objected, and indeed, only

objected after its five-person steering committee resolved to do so on behalf of its approximately

70-member constituency, which was not asked to vote on filing an objection. (See December 21,

2023 Hr’g Tr. 112:12–20, 113:6–12 (Adler) (conceding the foregoing).) Every other

constituency and creditor that spoke in connection with the Wind-Down Motion, with the

exception of pro se creditors Cathy Lau and Anne Yeilding, were in support: the Earn Group

filed the Earn Statement, to which Ignat Tuganov and pro se creditors Daniel A. Frishberg,

Courtney Burks Steadman, Immanuel J. Herrmann, Rebecca Gallagher, Georges Georgiou, and

Mela Stewart filed joinders (ECF Doc. ## 4136, 4154); Simon Dixon and David Kahn, on behalf

of BNK to the Future, also filed a letter in support (ECF Doc. # 4124). Many of those parties re-

voiced their support at the Hearing, to which other pro se creditors joined.4

For the members of the Borrower Group who are seeking to refinance loans, the amount

of liquid cryptocurrency that makes up the total distribution is particularly important. (See

Borrower Objection ¶ 32 (noting that certain borrowers “need every coin in connection with a

potential refinance”).) Accordingly, the Borrower Group (or, at least, its steering committee) is a

single-issue voter: it cares only about the absolute amount of liquid cryptocurrency distribution.

It recognizes the higher absolute distributions available under the MiningCo Transaction but is

prepared to forego that higher recovery—not only for itself, but on behalf of the entire creditor

body—in single-minded pursuit of its goal.

The Borrower Group argues for implementation of the Original OWD, which, at 11/17/23

prices, it argues offers marginally more liquid cryptocurrency than the MiningCo Transaction.

(Id. at 2.) However, the plan it proposes is not on the table: the Original OWD depended on a

now-obsolete agreement that is not ready to spring into action. In no world would pursuing it be

the “most expeditious way forward.” (Id. ¶ 39.) Attempting to pursue it would mean reviving it

piecemeal and incurring additional expenses through the delay, and ultimately likely re-

solicitation of the very MiningCo Transaction currently before the Court, or an even more

4 See e.g., December 21, 2023 Hr’g Tr. 123:22–22 (Holcomb); id. 126:10–13 (Khanjula).

expensive version. (See December 21, 2023 Hr’g Tr. 128:22–23 (Koenig) (stating that if the

Wind-Down Motion was denied, the Debtors would need to resolicit the MiningCo Transaction

at its current price or higher).)

The Borrower Group asserts that “[t]here is no reason why the Original OWD Plan with

its $50 million capitalization should not be implemented.” (Id. ¶ 37.) But there is a good reason.

In fact, there are many good reasons. (See Wind-Down Motion ¶¶ 29–34 (detailing progress

made on negotiating Litigation Administrator agreements, negotiating lower fees, engaging

crypto distribution agents, streamlining the Claims resolutions process, monetizing illiquid

assets, acquisition of the Cedarvale site, engaging auditing agents, and reducing headcount).)

The BRIC, which was contemplated under the Original OWD to serve as Plan Sponsor, has

entered into a separate agreement with the Debtors. (See generally BRIC Supplement.) Further,

as the Puntus Declaration explains, the Debtors do not face a choice between capitalizing a

mining company with $50 million or capitalizing it with $225 million: during the post-

confirmation market check “all bidders proposed a capitalization amount for MiningCo

consistent with or higher than the $225 million capitalization amount ultimately agreed to with

US Bitcoin.” (Puntus Declaration ¶ 12.) This reflects both the increase in value of the mining

company ($740 million, the value at which US Bitcoin is investing) and the build-out cost for the

Cedarvale site, which Debtors had not yet acquired when the initial calculations were made.5

(Id. ¶¶ 12, 14.)

Accordingly, the Borrower Group’s numbers valuing the Original OWD at 11/17/23

prices, which they argue offer better liquid cryptocurrency recovery, would need to be steeply

5 Cedarvale was acquired by Celsius as part of a Rule 9019 settlement approved by the Court without any

objections. (See ECF Doc. # 3725.) The build-out of Cedarvale was going to require a capital investment by

Celsius.

discounted, as they take none of the above into account.® Further, the Original OWD at 11/17/23

prices is not the relevant point of comparison: the Debtors only need to provide better recoveries

than the OWD that was disclosed and voted on, the Original OWD Recoveries, which were

based on the May 31, 2023 prices.

a. Less Initial Cryptocurrency Recovery

The Borrower Group argues first that the Recovery Waterfall is missing a column,

namely the Original OWD with pricing as of November 17, 2023, which provides ~4% greater

liquid cryptocurrency recoveries than the MiningCo Transaction with November 17, 2023

pricing. (Borrower Objection { 19.) The relevant numbers are compared below, with the

Borrower Group’s calculation in bold:

Ob AY

(Recovery Waterfall; Borrower Objection § 18.)

The Borrower Group argues that because the Original OWD at 11/17/23 prices provide

more liquid cryptocurrency than MiningCo recoveries at 11/17/23 prices, the MiningCo

Transaction is a material modification. (Borrower Objection § 19.) However, this argument fails

for at least two reasons.

First, although cryptocurrency prices have changed, under the terms of the Plan and

Disclosure Statement, the Debtors are only required to secure better terms than in the Plan as

6 During the Hearing, Simon Dixon estimated that the attendant costs of pursuing the Borrower Group’s

proposal would result in $48 million /ess in cryptocurrency distributions. (See December 21, 2023 Hr’g Tr. 109:6—

10 (Dixon).)

28

proposed and approved—namely, as of the 5/31/23 pricing, the Original OWD Recoveries. That

provides a liquid cryptocurrency recovery of 44%. If the MinmgCo Transaction were

implemented at those prices, it would result in the lower initial distribution of 42.3%; however,

at current prices, and with the other cost savings and progress the Debtors have made, the initial

cryptocurrency distribution is 51%. Fifty-one percent is greater than 44%—the Debtors thus

clear the threshold of providing “better recovery” on this metric.

b. Different Recovery Mix

Borrower Group also argues that the Original OWD at 11/17/23 prices provide for 9%

more liquid cryptocurrency as a portion of the overall mix (the “Recovery Mix’’) than the

MiningCo Transaction. (/d. § 21.) The Borrower Group calculates the Recovery Mix as follows:

O04 AY Pitted Orr)

Liquid Grypiove | ruse | raone [eras

Asset Disa e [118% [| asis

Mnigcesnckss [eas [naw [| aw

(Id. § 21.)

Similar to the above, the Borrower Group’s figure of 9% is a result of comparison to the

pie-in-the-sky Original OWD at 11/17/23 prices, which is not the relevant comparison.

However, even comparison to the relevant number—the Original OWD Recovery of 71.8%—the

point remains that the mix of liquid cryptocurrency is still 4.48% higher under the Original OWD

than the MiningCo Transaction at 11/17/23 prices. As stated above, the Borrower Group is

particularly concerned with the portion of the total recovery received in liquid cryptocurrency.

While the Debtors argue that the capitalization of MiningCo is “at least an economically

equivalent result for creditors,” a reduction of even a few percentage points in liquid

29

cryptocurrency distribution is material to the Borrower Group, and it is not for the Debtors to

unilaterally decide that a dollar worth of cryptocurrency is equivalent to a dollar worth of equity.

(Puntus Declaration § 14; Borrower Objection § 19; December 21, 2023 Hr’g Tr. 76:6—15

(Bonsall).)

The Court is mindful of this fact. If the MimingCo Transaction would provide for the

exact same amount of recovery while redistributing the Recovery Mix—.e., changing the

amounts of each “ingredient” in the recovery “salad”—this 4.48% difference could potentially

raise a significant concern. However, as the Debtors’ uncontroverted papers show, this is not the

situation at hand. The Debtors are giving each creditor a Digger salad, which contains different

proportions of each original ingredient: but crucially, the new salad contains at /east as much of

each ingredient as the original salad did.

The Debtors thus clear the hurdle of providing a better recovery to creditors. The

MiningCo Transaction at 11/17/23 prices still provides a higher absolute amount of liquid

cryptocurrency than the Original OWD Recovery, as set forth below:’

A Tete

5/31/23 11/17/23

0,

Total Recovery % of 61.28% 75 69%

Claim

1 1

Liquid Crypto as % 71.80% 67.32%

of Recove

(Borrower Objection {J 20-21.)

7 This illustration use the average numbers provided in the Campagna Declaration and Borrower Objection,

but the Reply singles out the Class 2 Retail Borrower Claims as follows: “Retail Borrowers currently stand to

receive approximately 89% of their claims under the MiningCo Transaction (based on November 17, 2023 prices)—

a 6% increase when compared with the projected recoveries for Class 2 (Retail Borrower Deposit Claims) under the

[Original OWD].” (Reply § 44.) Thus, the recovery in absolute terms of liquid cryptocurrency for the Class 2

Retail Borrowers would accordingly be even higher.

30

Taking an illustrative claim of $100, under the Original OWD, a creditor would receive

71.8% of $61.28 in cryptocurrency, which equals $43.99 worth of cryptocurrency. That same

$100 claim under the MiningCo Transaction would receive 67.32% of $75.69 in cryptocurrency,

which equals $59.95 worth of cryptocurrency. Thus, when comparing the amount of

cryptocurrency in the original “salad” to the new “salad,” although the overall proportion is

lower, the MiningCo “salad” still results in a higher absolute amount of cryptocurrency

distributed to each creditor. The MiningCo Transaction thus satisfies condition of better

recovery than the Original OWD.

Accordingly, the Court is not in the position of “weighing whether the modification is so

adverse that a creditor would be apt to reconsider acceptance.” In re Frontier Airlines, Inc., 93

B.R. 1014, 1023 n.3 (Bankr. D. Colo. 1988). When considering the numbers that the MiningCo

Transaction needs to beat (the Original OWD Recoveries), as opposed to the Borrower Group’s

infeasible proposal of the OWD at 11/17/23 prices (even before discounting for delay), the

numbers clearly show that the MiningCo Transaction provides better recoveries.

C. Section 1127(b) Is Not Triggered

In the Disclosure Statement, the Debtors notified creditors that a vote to accept the Plan

would be a vote “to accept both the NewCo Transaction and the Orderly Wind Down.” (Wind-

Down Motion ¶ 25 (citing Disclosure Statement Art. III.I, III.HHH).) Creditors voted on the

Plan and the recoveries described thereunder, and on an OWD that allowed for the selection of

an alternate Backup Plan Sponsor so long as the terms of the deal were no worse than set forth in

the Backup Plan Sponsor Agreement. The selection of US Bitcoin is therefore not a

modification of the plan, and section 1127(b) is not per se triggered.

However, even a change contemplated by the Plan cannot run afoul of section 1127(b).

Ionosphere Clubs, Inc., 208 B.R. at 816. Any change that “materially and adversely changes the

way that a claim or interest holder is treated” qualifies as a modification and entitles claimants to

new disclosure and an opportunity to change their vote. In re Am.-CV Station Grp., Inc., 56

F.4th at 1305; see also In re American Solar King Corp., 90 B.R. at 825. The UST and

Borrower Group both argue that the MiningCo transaction is a such modification. For the

reasons below, their arguments are without merit.

The UST argues that the MiningCo Transaction is a modification because it changes the

mining manager: “[u]nder the Plan, if the Debtors were to pivot from the [NewCo] Transaction,

the Debtors would transition to a mining only business which would be managed by [t]he

BRIC.” (UST Objection at 18.) However, as explained above, the Plan explicitly allows for the

possibility of an alternate Backup Plan Sponsor. Accordingly, this is not a “modification,” and

does not require additional disclosure. This also renders moot the Borrower Group’s concern

that this Court does not have jurisdiction over the Wind-Down Motion because there are appeals

pending, which is discussed further below.

The UST further argues that the MiningCo Transaction “[alters] the substantive rights of

all of the Debtors’ creditors” because it “will change the amounts and type of funds recoverable,

which will also likely impact timing and rate of payments.” (UST Objection at 19.) This

concern is echoed by the Borrower Group, for which the toggle to receive more liquid

cryptocurrency was especially important, and which is concerned about the change in Recovery

Mix. (Borrower Objection ¶¶ 11, 22.)

To the first point, because the MiningCo Transaction is within the letter of the Plan,

creditors have not modified their legal relationships. (Reply ¶ 31.) Further, their substantive

rights are not affected, as the MiningCo Transaction will “provide unsecured creditors with their

Pro Rata portion of the same four types of distributions to creditors set forth in the [Original

OWD]” and no creditor’s recovery will be “reduced or augmented disproportionately with

respect to other creditors.” (Id. ¶ 34.)

Although the Borrower Group had bargained for the Unsecured Claim Distribution Mix

Election (to receive more or less liquid cryptocurrency or stock, the “Mix Election”), the Mix

Election was only valid for the NewCo Transaction. The Plan provides that the concept is

eliminated in the event of an Orderly Wind Down. (Id. ¶ 28.) Under the Plan, the Mix Elections

are “eliminated, [and] all Holders of Claims receive Pro Rata share of consideration without

adjustment for [Mix Elections].” (Plan Art. IV.E.1.) Because the Plan uniformly removes the

effect of the elections, it does not provide different treatment to similarly situated creditors, it

does not violate section 1123(a)(4) of the Bankruptcy Code.

The Debtors have carried their burden of showing that creditors are not materially or

adversely harmed—on the contrary, they are receiving better distributions. The only creditor

constituency to object, the Borrower Group, has put forth an entirely unrealistic third option. Its

arguments that its rights or recoveries are harmed do not hold up: it uses an impossible third

option, inflated with today’s prices (when the Original OWD Recoveries are the relevant

comparison point), fails to account for the costs of the additional months in bankruptcy of

attempting to pursue that option (estimated during the hearing as $20 million per month of

delay),8 and laments the marginal reduction in the proportion (but not absolute amount, the

relevant comparison point) of liquid cryptocurrency in their Recovery Mix. But this does not

amount to a material adverse change. Creditors, including the Borrower Group, receive

8 See December 21, 2023 Hr’g Tr. 99:15 (Kuhns); id. 108:18–20 (Dixon).

increased overall recoveries that provide for increased absolute recovery of liquid

cryptocurrency. Thus, Section 1127(b) (and the attendant sections it implicates) are not

triggered.

D. The Pending Appeal Does Not Divest the Bankruptcy Court of

Jurisdiction to Rule on the Motion

Bankruptcy courts commonly implement unstayed, confirmed plans while an appeal of

the plan is pending. See In re Roman Catholic Diocese of Rockville Centre, 652 B.R. 226, 234

(Bankr. S.D.N.Y. 2023) (“Debtor cites authority for the uncontroversial assertion that confirmed

and unstayed plans are routinely enforced pending appeal.”); In re Prudential Lines, Inc., 170

B.R. 222, 244 (S.D.N.Y. 1994) (“[I]t has long been held that in the absence of a stay pending

appeal of the plan confirmation, the bankruptcy court is entitled to implement the plan.”).

Bankruptcy courts are not “divested of jurisdiction ‘to decide issues and proceeds

different from and collateral to those involved in the appeal.’” In re Sabine Oil & Gas Corp.,

548 B.R. 674, 679 (Bankr. S.D.N.Y. 2016) (citing In re Bd. of Directors of Hopewell Int’l Ins.

Ltd., 258 B.R. 580, 583 (S.D.N.Y. 2001)). If an appeal “divested bankruptcy courts of

jurisdiction over all issues relevant to confirmation,” it “would lead to an absurd result” such that

“[the Bankruptcy Court] would effectively cede control of the conduct of a chapter 11 case to

disappointed litigants.” Id. at 681. Therefore, to the extent the Court determines that the Wind-

Down Motion implements the terms of the confirmed Plan, it has jurisdiction to enter the

proposed order approving the Wind-Down Motion.

The Court also has jurisdiction even if the Wind-Down Motion results in a modification

to the Plan and Confirmation Order. Courts that have considered the effect of the divestiture of a

bankruptcy court’s jurisdiction to modify a confirmation order that has been appealed have held

that a bankruptcy court may enter an order modifying a plan where such modifications do not

impact the issues on appeal. See In re Commodore Corp., 87 B.R. 62, 64 (Bankr. N.D. Ind.

1987) (approving a technical modification to change the effective date of the plan finding the

modification did “not impact those issues on appeal”); In re Brown, No. 6:07-CV-316-ORL-31,

2007 WL 3326684, at *1 (M.D. Fla. November 6, 2007) (affirming the bankruptcy court’s entry

of a modified confirmation order that withheld a portion of plan distributions finding the

modification had no impact on an appeal that raised issues of “good faith (or lack thereof) in

filing . . . and ability to make [] payments”).

Three creditors have appealed the Confirmation Order. (See Notice of Appeal, ECF Doc.

# 4032; Notice of Appeal and Statement of Election, ECF Doc. # 4033; Notice of Appeal, ECF

Doc. # 4039). These appeals do not prevent this Court from approving the Wind-Down Motion.

The statements of issues filed with respect to two of the three appeals raise discrete

issues, including the ownership of loan collateral and the scope of the releases and exculpation in

the Plan. (See Statement of Issues and Designations of Items to Be Included in the Record for

Johan Bronge’s Appeal in Celsius Case 22-10964, ECF Doc. # 4065; Appellant’s Designation of

the Record and Statement of Issues to be Presented on Appeal, ECF Doc. # 4083). While the

Court has previously found that it “does not have jurisdiction to reconsider the Confirmation

Order,” in that instance the movant sought relief that related to the issues on appeal—

specifically, Dmitry Kirsanov sought relief regarding his CEL Token Custody Claims. (Order

Denying Kirsanov’s Motion for Reconsideration, ECF Doc. # 4046 (emphasis added).) The

identity of the Mining manager is not on appeal, nor do the changes to the Original OWD

implicate issues currently on appeal. These changes are discrete changes under the terms of the

Original OWD. Therefore, the Court has not been divested of jurisdiction to rule on the Wind-

Down Motion.

IV. CONCLUSION

The Plan, Disclosure Statement and Confirmation Order allow for the selection of an

alternate Backup Plan Sponsor, so long as it provides better terms, and the Court may permit

this “toggle” so long as it does not amount to a material adverse change such that it constitutes a

modification under 1127(b).

For the reasons explained above, the Court finds that the MiningCo Transaction falls

squarely within the terms of the confirmed Plan, and does not constitute a modification. But

even if it were a modification, there is no material adverse effect on creditors, so re-solicitation

would not be required. Accordingly, the Wind-Down Motion is GRANTED.

The Debtors have submitted an Order consistent with this Opinion that will be entered.

Dated: December 27, 2023

New York, New York

Martin Glenn

MARTIN GLENN

Chief United States Bankruptcy Judge