Celsius Network's 4th Distribution Details, 2025 Tax Planning with CryptoTaxGirl, and Ionic Digital Mining Updates

Aaron Bennett

The 7.2% Distribution [0:00:54]

• Fourth Distribution Announcement: Celsius Network will begin its fourth distribution of $344.4 million in February.
  • This distribution equates to approximately 7.2% of eligible claims.
  • The cumulative recovery for eligible creditors from all distributions (initial, second, third, and fourth) will reach 72.1% of their claim value.
  • This amount is a significant increase compared to previous distributions:
    • Second distribution: $127 million (2.5% of claim) [0:01:27]
    • Third distribution: $220 million (4.3% of claim) [0:01:30]
• Sources of Funds for Fourth Distribution: The $344.4 million is composed of:
  • $256.4 million from litigation proceeds designated for distribution by the Litigation Administrator (e.g., retail clawbacks, recovered funds). [0:02:23]
  • $73.3 million from the disputed and contingent claims reserve, which has been reduced as the bankruptcy progresses. [0:02:30]
  • $14.7 million from forfeited procedures, representing funds from creditors who have not claimed their prior distributions. [0:02:59]
• Form of Distribution:
  • The fourth distribution is primarily in Bitcoin (BTC) [0:04:36].
  • It is expected to be the final distribution in Bitcoin, with all future distributions planned to be in cash and/or stablecoins. [0:04:22]
  • No Ethereum (ETH) will be distributed. [0:04:36]
  • The Bitcoin reference price for valuing this distribution will be disclosed closer to the distribution date. [0:03:46]
• Distribution Process and Important Cautions:
  • Creditors will receive their distribution through the same agent (e.g., PayPal, Coinbase, Venmo) used for their last successful distribution. [0:04:57]
  • For PayPal or Venmo distributions, an email with a code will be sent; creditors should go directly to the platform (PayPal or Venmo website/app) to input the code, not click links in emails to avoid phishing. [0:06:03]
  • For Coinbase distributions, an email will provide an update or steps to take if there's an issue (e.g., KYC verification). [0:06:19]
  • Only official email addresses from Celsius, Stretto, or Hyperwallet should be trusted for communications. [0:06:40]
• Exclusions: Creditors in the convenience class (claims of $5,000 or less) who have already received their initial distribution are not eligible for this fourth distribution. [0:03:30]

  

Celsius Taxes [0:07:39]

• Tax Impact of the New Distribution: The 7.2% Bitcoin distribution in February 2026 will significantly impact how creditors approach writing off Celsius losses for the 2025 tax year. [0:07:50]
• The Dilemma of Writing Off Losses in 2025:
  • Previously, it was suggested to write off the remaining Celsius claim in 2025, assuming uncertainty about future litigation proceeds. [0:09:50]
  • However, receiving this significant 7.2% distribution means that if a full loss was claimed in 2025, any future distributions (like this 2026 one) must be recognized as taxable income. [0:11:47]
• Factors Influencing the Decision: Laura (CryptoTaxGirl) outlines several key factors to consider when deciding whether to write off losses in 2025 or defer:
  • Cost Basis Relative to Petition Price:
    • High Cost Basis: Generally, it makes sense to write off the loss in 2025, especially if there are other capital gains to offset. [0:19:54]
    • Low Cost Basis: Generally, it is not recommended to write off the loss in 2025, as the tax benefit from a small loss deduction might not outweigh the future income recognition. [0:20:36]
  • Significant Bitcoin (BTC) Portion in Claim:
    • If the claim was primarily in Bitcoin, distributions are often treated as non-taxable withdrawals, maintaining original cost basis and holding period. [0:16:27]
    • If the claim was in other cryptocurrencies (e.g., USDC, Solana) and distributions are in BTC, these are considered "not in kind" and do create taxable gains/losses. [0:16:50]
  • Presence of Other Capital Gains in 2025:
    • If a creditor has significant capital gains in 2025, taking a Celsius loss can be highly beneficial to offset those gains, reducing overall taxable income for the year. [0:17:51]
    • Without other capital gains, capital loss deductions are limited to $3,000 per year, with the remainder carrying forward indefinitely, which may not be advantageous if large future distributions must be recognized as income. [0:12:44]
  • Total Claim Size (Greater or Less than $45,000):
    • Less than $45,000: Future income to recognize from distributions is likely small (e.g., $3,000 or less), which a $3,000 annual capital loss deduction can fully offset. Therefore, writing off the loss in 2025 is often recommended. [0:19:11]
    • Greater than $45,000: Future income recognition could be substantial (e.g., $60,000-$100,000), making the $3,000 annual loss deduction ineffective at offsetting it, potentially leading to higher tax liabilities. [0:18:34]
• Complexity of Crypto Taxes for 2025:
  • The IRS requires a shift from a universal accounting method to a wallet-by-wallet method for calculating crypto gains and losses, adding complexity. [0:22:46]
  • The upcoming Form 1099-DA will also impact how taxes are calculated, emphasizing the importance of accurate cost basis. [0:25:18]

    

Mining Updates [0:26:55]

• Ionic Digital December 2025 Mining and Operations Update:
  • In December, Ionic Digital mined 37.34 Bitcoin (BTC). [0:27:10]
  • This represents a 29% decrease in production compared to the previous month. [0:27:13]
• Reason for Production Decline:
  • The decrease was primarily due to the planned wind-down of mining operations at the Cedar Veil facility. [0:27:21]
  • This facility is transitioning to NScale, a vertically integrated AI cloud provider, as announced in October. [0:27:25]
  • NScale took possession of the Cedar Veil facility in December, and all mining equipment was transferred out. [0:27:47]
• Strategic Redeployment of Mining Operations:
  • Ionic Digital's remaining self-mining operations are now concentrated at its Midland site. [0:27:56]
  • The company is strategically redeploying its most efficient miners to the Midland site to optimize fleet deployment and maximize mining efficiency. [0:28:06]
  • This redeployment is expected to be completed by the second quarter of 2026. [0:28:17]
• Financial Status and Bitcoin Holdings:
  • Ionic Digital continues to maintain a zero-debt position. [0:28:22]
  • No Bitcoin was liquidated in December. [0:28:24]
  • As of December 31, 2025, the company held 2,719.5 BTC, an increase of 37.1 BTC over the prior month. [0:28:27]
• Future Outlook: While the partnership with NScale for AI and Bitcoin mining is seen as positive for long-term growth, there are no immediate updates on SEC listing or liquidity for selling Ionic Digital stock. [0:28:47]