Bankrupt Bitcoin mining firm Rhodium recently received a legal setback when the court ruled that certain holders should be treated as creditors.
Rhodium is a Texas-based Bitcoin mining firm that filed for Chapter 11 bankruptcy in the U.S. Bankruptcy Court for the Southern District of Texas on Aug. 24, 2024. The filing mentioned six subsidiaries, namely Rhodium Encore, Jordan HPC, Rhodium JV, Rhodium 2.0, Rhodium 10MW, and Rhodium 30MW.
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During the court proceedings over the next months, investors who had entered into Simple Agreements for Future Equity (SAFEs) with Rhodium filed proofs of claim worth more than $70 million.
SAFEs are popular financial instruments that startups use to raise early-stage funding without immediately issuing equity. Rhodium had also issued SAFEs in 2021 to raise capital.
As per the terms, Rhodium SAFEs entitled holders to get equity in case of an initial public offering (IPO) and a cash-out feature. It meant SAFE holders were entitled to cash-out payments in case of a liquidity or dissolution event.
However, the debtors argued that the SAFE holders aren’t eligible for creditor claims because SAFEs aren’t debt but contingent equity instruments. In response, SAFE investors, including Celsius Holdings, claimed that their holdings entitled them to cash-out payments following the liquidity or dissolution event.
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Court sides with SAFE investors
Since Rhodium’s remaining assets are to be liquidated and distributed under the amended Chapter 11 plan, they are entitled to cash-out payments, SAFE holders further argued.
On Aug. 30, the court ruled that SAFE agreements created a “claim” to the contractual cash-out amount — a claim senior to equity but junior to the claims of general unsecured creditors.
This story was originally reported by TheStreet on Sep 12, 2025, where it first appeared in the MARKETS section. Add TheStreet as a Preferred Source by clicking here.